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Indian equities slide on rate hike, political turmoil

business Updated: Mar 19, 2011 13:24 IST

Benchmark indices of Indian equities markets closed deep in the red for the second consecutive week amid acute volatility as political uncertainty coupled with interest rates hike and the Japan crisis dampened investor sentiment.

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended the week at 17,878.81 points, down 1.62 per cent or 295.28 points from the previous week's close of 18,174.09 points.

The benchmark Sensex had lost 1.69 percent or 312.36 points during the previous week.

Indian markets witnessed volatile trading this week. The markets opened the week on a bullish note despite global meltdown following the devastating earthquake and tsunami in Japan. However, Indian stocks fell the next day in line with the world markets.

Hike in key policy rates by the central bank and political uncertainty following WikiLeaks' disclosures dampened sentiments at the markets during the last two sessions.

The benchmark Sensex fell 271.06 points Friday, the last trading day of the week after the opposition demanded the resignation of Prime Minister Manmohan Singh following leaks of US diplomatic cables alleging that MPs were bribed to win a parliamentary trust vote in 2008.

At the National Stock Exchange (NSE), the broader 50-share S&P CNX Nifty also ended the week on a negative note. The Nifty fell 1.34 percent or 72.95 points to close at 5,373.70 points Friday.

There was heavy selling pressure in interest rate-sensitive auto, consumer goods and banking stocks after the central bank hiked its short-term lending and borrowing rates by 25 basis points each for the eighth time in 15 months to tame inflation in a move that could make corporate, housing and auto loans dearer.

In its mid-quarter review of the monetary policy, the Reserve Bank of India (RBI) Thursday also revised upward its inflation forecast sharply to 8 percent by end-March, from 7 percent forecast in January and a lower 5.5 percent in November.

On the last trading day of the week, Mahindra and Mahindra slumped 3.31 percent at Rs.632.95. Reliance Infra, down 3.87 percent at Rs.627.55; HDFC, down 2.57 percent at Rs.620.95; Hero Honda, down 2.35 percent at Rs.1,474.15; and Tata Motors, down 2.17 percent at Rs.1,117.95 were among the top Sensex losers.

Only two out of the 30 Sensex scrips closed in the green Friday: Tata Steel, up 0.26 percent at Rs.596.30 and Tata Power, up 0.17 percent at Rs.1,232.

Other Asian markets ended the week on a positive note. The Japanese Nikkei average rebounded 2.72 percent to close at 9,206.75 points. Japanese stocks witnessed extremely volatile trading this week amid concerns of a nuclear meltdown in an atomic power plant in earthquake-hit Fukushima.

China's Shanghai Composite rose 0.33 percent at 2,906.89 points and Hong Kong's Hang Seng closed 0.07 percent up at 22,300.20 points Friday.