Oil, inflation hammer key BSE indices to 52-week lows

Written by Markets Bureau | Mumbai, Jun 27 | Updated: Jun 29 2008, 05:03am hrs
Besides taking a toll on frontline stocks, the surging inflation and crude oil prices battered several interest rate-sensitive sectoral indices - the BSE Bankex, Auto, Power, Realty and Public Sector Undertakings (PSU) - forcing them to close at their 52-week low on Friday.

While attributing the fall to the spiralling crude oil prices and the double-digit inflation, analysts said the markets would remain volatile till crude prices were corrected. These sectoral indices lost more than 200 points on Friday, ending the day on a negative note.

The major loser of the day was BSE Bankex, which shed 345.64 points or 5.43% before closing at 6,125.95 points. The BSE Auto lost 204.83 points or 5.26%, closing at 3,689.92 points. BSE Power lost 119.55 points or 4.87% ending the day at 2,454.81 points.

Anita Gandhi, head of institutional business, Arihant Capital, said, "The volatility in the market is expected to remain for at least a month more. If crude prices are not corrected and stabilised, the markets are going to remain volatile. There are strong chances that after crude prices touch $145 per barrel, we may see markets slipping further."

Apart from bank and auto indices, the BSE Realty lost 227.18 points or 4.45% before ending the day at 4,875.25 points. While BSE PSU index closed at 5,821.62 points, losing 261.09 or 4.29%.

"The major reason behind the sliding price in realty sector for the past few days is because of the rise in interest rates. Also, we have seen that realty prices have started correcting. While in the banking sector, the fall was basically due to the hike in CRR rate," added Gandhi.

Analysts also said that if crude oil prices touch a high of $160 per barrel, then more problems would grip global markets. "Due to rise in inflation and interest rates, the realty and banking sectors have been hit very badly. Now, we only hope that inflation cools in the coming days. This will have some positive impact on the markets," said Anil Advani, head of research at SBI Caps.