Disappointed by lower than expected fourth quarter numbers of Infosys and fears of an interest rate hike in the mid-quarter review of monetary policy by the Reserve Bank of India (RBI) due in May, the benchmark Sensex of the Bombay Stock Exchange (BSE) fell by 1.6% or 310 points to close at 19,386.8 on Friday. The broad-based Nifty at the National Stock Exchange fell 87.0 points to 5,824.6.
The government on Friday announced an inflation figure of 8.98% for the month of March against 8.31% in the month of February.
“With sharp pick up in the manufacturing inflation it is now a more broad based phenomenon. I expect a 50 basis point hike in the monetary policy review in May and all interest rates are headed northwards,” said Abheek Barua, chief economist, HDFC Bank.
It came out as a major concern for the markets as a rise in interest rates will pull down the profit margins for the companies going forward. While the crude oil prices are already ruling high, if there is a hike in diesel prices, it may worsen things.
“It could lead to an inflation of over 10% by July–August,” said Barua.
Earlier in the day, weak results by Infosys (that has a 9.4% weightage in Sensex) pulled the markets down as its stock fell by 9.6% during the day.
“The investor sentiment was dented first by weak numbers from Infosys and then dampened further by the high inflation numbers for the month of March.” said Alex Mathew, head of research, Geojit BNP Paribas Financial Services.
Infosys guidance had a bearing on other IT stocks too as Wipro, HCL and TCS fell by 5%, 3% and 1.5% respectively. The IT and the technology indices were the biggest losers on Friday as they fell by 6.4% and 4.8% respectively.