Subbarao’s concerns on inflation halts market rally, Sensex falls 169 points

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ENS Economic Bureau: Mumbai, Jan 17 2013, 01:51 IST

Dalal Street fell on Wednesday following media reports that the Reserve Bank of India (RBI) Governor D Subbarao raised concerns about the high inflation, denting hopes of a 50 basis points rate cut this month.

The Sensex fell by 169.19 points, or 0.85 per cent to settle at 19,817.63. Rallying 324 points in previous three sessions, the index had crossed 20,000-mark after two years in Tuesday’s trade on the back of rate cut hopes, signs of corporate earnings and postponement of GAAR.

RBI Governor Subbarao has once again poured cold water on the stock market rally with his remark that inflation is “still quite high” though off its peak, and there is “no room for stimulus” on both monetary and fiscal fronts.

“When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus. So that is the big concern,” Subbarao said while addressing students of IIM Lucknow.

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