While growth concerns were dragging stocks down, an inflation punch has decisively pushed them down again. Concerns over liquidity and rising commodity prices took a backseat on Thursday as the 30-share Sensex of the BSE fell by 116 points or 0.6% after food inflation data signalled a clear mood for a tight interest rate regime.
The benchmark closed at 20,184.74 points while the National Stock Exchange 's 50-share Nifty closed 31 points or 0.5% lower at 6,048.25.
"In the short term there will be a growth-inflation trade-off as if inflation has to be controlled. There will have to be some sacrifice on growth," said DK Joshi, principal economist at credit rating firm Crisil.
"If the interest rate in the next fiscal rises beyond 50 basis points (0.5 percentage point), then the risk on growth rate will rise."
Over the past three trading sessions, banking, realty and automobile stocks have been major losers. Banks will pay more for their deposits, while costlier loans will make car purchases difficult. Capital goods and consumer durable stocks were also among losers.