Sensex down 29 points as rate hike fears persist

Extending its losses for the second consecutive session, the Bombay Stock Exchange (BSE) benchmark Sensex today closed 29 points down in choppy trade as fears of a second rate hike and weak global cues continued to weigh on the investor sentiment.

Erasing early gains, the 30-share barometer of the Bombay Stock Exchange closed the day at 17,909.46, down 28.70 points, or 0.16%.

The Sensex, which touched its highest level in 29 months yesterday, moved between a high of 17,978.56 points and a low of 17,858.73 during the day.

The National Stock Exchange's wide-based Nifty-50 Index, too, lost 0.14% to finish at 5,378.75 points.

Rate-sensitive sectors, such as banking, realty and auto, were the among the worst hit stocks today.

Weak IIP data, disappointing results from Infosys and double-digit inflation continued to weigh on the sentiment.

Inflation continued in double digits for the fifth consecutive month during June, 2010, at 10.55%. Food inflation also rose to 12.81% for the week ended June 3 from 12.63% a week ago.

"The persistently high inflation has caused the Reserve Bank to undertake a mid-term review hike in key policy rates during July," Sharekhan said in a note.

Marketmen said the sentiment on Dalal Street was low due to negative news coming in from overseas. The US Fed's gloomy outlook for the economic recovery and slow growth of the Chinese economy during the second quarter weakened investor sentiment across the globe, they said.

"Investors pondered about a reduction in the US economic growth and slowdown in China," Amar Ambani, Vice President, Research India Private Client, IIFL, said.

HDFC, which yesterday posted a 23% rise in June quarter profit, declined 1.12%, while HDFC Bank fell 1.12%. ICICI Bank and SBI both dropped 1%.

"The market is locked in a range and is waiting for some positive triggers to break resistant level. Rising inflation, coupled with weak global cues, has dampened confidence on the Street," SMC Capitals Equity Head Jagannadham Thunuguntla said.

Realty major DLF slipped 0.53% in today's trade.

In the major auto stocks, Hero Honda lost 0.71%, M&M 0.39% and Maruti Suzuki 1.09%.

Telecom stocks also witnessed profit booking, with RCom plunging 1.45%, the most in the BSE-30. Bharti Airtel, too, slipped 1.05%.

However, a recovery in IT stocks and a rise in RIL and metal stocks capped the fall in the market.

Reliance Industries, which carries the maximum weight in the Sensex, rose 0.37% to Rs1,073.

After being battered for two straight sessions, Infosys today bounced back and ended with a net gain of 0.57%.

TCS rose 1.15% on hopes of good June quarter numbers, which will be declared later today. Wipro rose 1.12%.

Metal stocks also attracted some buying, with Tata Steel rising 1.11%, Hindalco 0.57% and Jindal Steel 0.23%.

With a jump of 2%, HUL was the biggest gainer in the Sensex pack, followed by Tata Motors, which advanced 1.15%.

In the BSE-30, 13 stocks settled with gains, whereas 17 scrips ended in the red.

L&T, which was the best performer yesterday, saw profit booking and ended 0.47% lower. ONGC also lost 1.3%.

Market experts said the trading sentiment was mixed as funds indulged in booking their profits after the recent rally on the two bourses and shifted their money to fundamentally strong stocks available at cheaper rates.

On the global front, Asian bourses closed in the red. However, Europe was trading higher at mid-session.