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More pain ahead for D-Street?

business Updated: Jul 03, 2008 23:45 IST
HT Correspondent

The mood is jittery than ever before on Dalal Street. With the European Central Bank hiking key interest rates for the first time in almost a year and oil breaching $145 mark, a bear raid appears almost certain. The ECB on Thursday hiked key interest rates by 25 basis points (100 basis points in 1 percentage point), 0.25 per cent, to a seven-year high of 4.25 per cent. As a result, the US dollar is expected to weaken further against a dearer Euro.

“The markets look more jittery after the ECB hiking key rates, said Manish Sonthalia, vice president, equity strategy, Motilal Oswal Securities. “This reiterates the fact that inflation everywhere is a cause for concern. The weakness of the dollar is an existing problem and is likely to worsen.”

Key equity indices on Thursday lost most of the ground gained in the previous day’s bounce back rally as crude oil boiled over to an all-time high amid weak global markets on concerns that Israel may declare a war against Iran. US light crude scaled an all-time high of $145 per barrel.

Taking a cue from weak European and Asian markets, the benchmark Sensex of the Bombay Stock Exchange closed lower by 571 points, or 4.18 per cent, at 13,094 points. The wider Nifty of the National Stock Exchange ended the day at 4,093 points, down 168 points, or 4.09 per cent.

“What played spoilsport today was the rumour that Israel is going to a war with Iran, which saw crude prices shoot through the roof, said Hansal Thackker, director, Lalkar Securities. “Further, there are concerns in the international investing community that India is slipping into stagflation (a high-inflationary low-growth scenario).”