The Sensex dropped 493 points on Friday — the biggest fall in eight months — to close at a three-week low of 19,692, a day after food inflation data of 18.3% raised concerns over economic and corporate earnings growth in the coming months.
This takes the total Sensex fall over the past four trading sessions to 870 points or 4.3%. The Nifty too fell by 143.7 points or 2.4% on Friday to close the day at 5,905.
“The inflationary concern is in for the long haul now and the government is not giving confidence that it will come out with a solution soon,” said Aseem Dhru, CEO, HDFC Securities. “More interest rate hikes and anxiety on rising oil prices are further dampening market sentiments.”
Interest sensitive sectors like banking, auto and real estate have been the biggest losers at the stock market over the week, falling by more than 7% each.
With three-fourths of the current financial year over, these factors may not hit this year’s overall growth too much, but may eat into growth expectations for the next financial year.
“High interest cost and high input cost may hurt bottomlines of companies in 2011-12,” Dhru said.