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Inflation figure pulls Sensex down

The markets became jittery after inflation rose to 13-year high of 11.05 per cent with Sensex tanking over 500 points to its one-month low.

business Updated: Jun 20, 2008 21:48 IST

An inflation figure of 11.05 per cent, followed by a broad hint from the finance minister that monetary policy may be tightened, precipitated a nosedive in Indian equity markets on Friday.

As droves of investors started getting out of the markets, the 30-share benchmark index of the Bombay Stock Exchange (BSE), the Sensex, closed at its lowest point since August 2007.

All the sectoral indices ended the day deep in the red. Metal, oil and gas and banking stocks were the worst hit.

The Wholesale Price Index for the week ended June 7 rose 11.05 per cent compared to 8.75 per cent the previous week. The latest figure was a 13-year high.

The equity markets had started on a weak note Friday anyway. Once the inflation figure was announced, there was a rapid fall that continued till the end of the trading session.

The Sensex opened at 15,168.05 points and touched a low 14,519.27 before closing at 14,571.29 points. It went down by 516.70 points or 3.42 percent compared to its closing figure Thursday.

The S&P CNX Nifty index of the National Stock Exchange, which opened at 4,504.20 points, closed at 4,347.55. It went down by 156.70 points or 3.48 percent from its previous close.

The BSE Midcap index, which closed at 6,032.43 points, went down by 197.74 points or 3.42 per cent.

The BSE Smallcap index, which closed at 7,397.66 points, went down by 262.76 points or 3.43 per cent.

The market breadth was negative. On BSE, 450 shares advanced, 2,247 declined and 43 maintained status quo.

The only prominent gainer of the day was ONGC at Rs.866.85 up 1.56 percent.

Top losers of the day included Reliance Communications at Rs.491.30 down 6.65 percent, Reliance Industries at Rs.2,096.60 down 6.61 percent and Hindalco at Rs.161.00 down 6.37 per cent.

Ashok Jainani, research head of Mumbai-based Khandwala Securities Ltd, said: "Higher than expected inflation number has caught the market off guard. It has hit investor sentiment.

"In the coming days policy makers might take some decisions such as price control or curb on consumption to tame inflation which might be viewed unkindly by the market.

"On a positive note, in the current scenario investors with longer term horizon will start coming in and the market might get enduring support around the 14,000 level," Jainani added.