Rate hike fears drags Sensex by 198 points

Written by Markets Bureau | Mumbai, June 6 | Updated: Jun 7 2008, 06:08am hrs
The burgeoning inflation and apprehensions of a possible interest rate hike by the Reserve Bank of India (RBI) made investors jittery, prompting them to go on a selling spree on Friday.

After opening on a flat note, key equity indices slipped in the negative at the fag end of the session with BSEs Sensex shedding197.54 points, or 1.25%, before closing for 15,572.18 while NSEs Nifty declined 49.15 points, or 1.05%, before closing at 4627.80.

On a weekly basis, the Sensex lost 843.39 points or 5.14% while the broader, Nifty closed the week on the depressing note, losing 242.3 points or 4.97%.

On Friday, the inflation rate measured by the wholesale price index (WPI) rose to 8.24%, the highest since August 2004 compared to 8.10% a week earlier.

Anita Gandhi, head of institutional business, Arihant Capital Market, said, Indian markets have already absorbed the inflation worries. However, the bearish view of FIIs is a matter of concern and it seems they are dumping Indian stocks for some other economy. Also, the governments reluctance to ease norms for FIIs is forcing them to sell in the Indian bourses.

Barring the auto sector, all BSE sectoral indices ended in the red. Major losers of the day were FMCG and realty sector, which lost 2.65% and 1.83% respectively.

After selling for the entire week, FIIs turned net buyers on Friday. According to the provisional figures from the stock exchanges, FIIs bought to the tune of Rs 76.65 crore, while domestic institutional investors were net buyers at Rs 400.15 crore on Friday.