Domestic stocks fell 0.13% on Monday

• tanvi_singh
• December 15, 2009

Domestic stocks fell 0.13% on Monday, erasing intra-day gains, on concern that the central bank may soon hike interest rates after data showed inflation has jumped to a 10-month-high, dealers said.

The benchmark 30-share Sensex closed down 21.48 points at 17,097.55. Shares rose in morning trade, mirroring a recovery across global markets, as concerns eased over Dubai’s debt woes on news that Dubai received a 10-billion-dollar bailout from oil-rich Abu Dhabi.

But investors sold rate-sensitive banking and housing stocks in afternoon trade after data showed a sharp rise in India’s inflation rate, increasing pressure on the Reserve Bank of India to tighten monetary policy. The wholesale inflation rate, India’s closest watched inflation measure, increased by 4.78% in November from a year earlier after rising by 1.34% in October, fuelled by soaring food prices.

“Banking stocks fell on concerns about an interest rate hike due to rising inflation,” said Atul Hatwar, dealer at brokerage Crosseas Securities.

India’s policymakers have said they will keep a watch on inflation and take action once they are assured that growth is back on track. Recent official figures showed that India’s economy grew by 7.9% in the fiscal second quarter, the best performance in 18 months, on the back of government spending and record low interest rates.

Indian markets have seen a surge in foreign capital flows which have pushed the Sensex up more than 77% this year and the rupee up to a one-year high against the dollar. The Sensex has more than doubled since March this year.

Losers led gainers 1,670 to 1,167 on turnover of $880 million. The country’s largest lender, State Bank of India, fell Rs 17.45, or 0.77%, to 2,248.3, while private lender ICICI Bank lost Rs 12.85, or 1.49% to 850.4.

India’s private housing finance giant HDFC fell Rs 10.2, or 0.38% to 2,682.95 on concerns that housing loan rates could rise. India’s biggest mobile phone firm Bharti Airtel fell Rs 11.5, or 3.47% to 319.85.
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• Last Modified: December 15, 2009
• Filed Under: Latest News, MARKETS, NATION, WORLD