Sensex dips 220 points on interest rate, economic growth concerns

Ignoring higher factory output numbers, the Bombay Stock Exchange (BSE) Sensex dipped for the second day today, down 220 points, and slipped below the 17k mark to 16,839.63 on investor worries over rising interest rates, inflation, and global economic uncertainties.

Investors are worried over high interest rates that will crimp corporate profits, brokers said. SBI and ICICI Bank raised lending rates yesterday, which impacted interest sensitive stocks.

The downtrend was led by IT, teck, banking, realty, power and metal sectors. Blue-chips such as RIL, Infosys, TCS, Wipro, BHEL, SBI and HDFC Bank were all hit.

IT sector suffered the most on likely economic slowdown in the US and Europe, which account for up to 85 per cent revenues of Indian's software services exporters.

Markets fell despite higher industrial growth reflected in IIP numbers for June. The growth was 8.8 per cent in June on the back of a smart recovery in the manufacturing sector and better offtake of capital goods.

The BSE 30-share index, Sensex, opened higher at 17,246.88, but declined to 16,784.56 intra-day. It finally closed at 16,839.63, down 219.77 points or 1.29 per cent. The NSE 50-share Nifty dropped by 65.35 points or 1.27 per cent to 5,072.95.

Global markets, which have been in turmoil since the downgrade of the US creditworthiness by ratings firm S&P last week, showed mixed trends.

"There is gloom in the global markets. However, India is the much better placed compare its peers on account of strong internal consumption as evident from the strong IIP numbers. The June IIP at 8.98 per cent is better than expectation," said Parag Doctor, associate vice-president at Equities, Motilal Oswal Securities. "IT sector continued to bleed for yet another day, with the probability of US entering a recessionary period. Besides, banking witnessed selling pressure as high food inflation at 9.9 per cent increased the chances of RBI going in for another round of interest rate hikes in its next monetary policy review." said Shanu Goel, Senior Research analyst at Bonanza Portfolio.

Meanwhile, Asian stocks ended mixed today. Key indices in Hong Kong, China and Singapore rose by between 0.13 per cent and 1.94 per cent, while those in South Korea, Japan and Taiwan fell 0.20 per cent to 1.33 per cent.

European stock markets rebounded after a weak start. Markets in UK, France and Germeny were trading higher by 1.75 per cent to 2.80 per cent.

Among the sectoral indices, the BSE-IT fell 2.44 per cent followed by Teck (2.24 per cent), Bankex (1.63 per cent), Realty (1.49 per cent) and Power (1.14 per cent).

Major losers from the Sensex pack were Tata Motors (5.26 per cent), Hindalco Ind (4.04 per cent), Jaiprakash Asso (3.28 per cent), Tata Power (3.12 per cent), Wipro (2.92 per cent), DLF (2.76 per cent), TCS (2.71 per cent), Infosys ( 2.64 per cent), SBI (2.53 per cent), HDFC Bank (2.32 per cent), Bharti Airtel (1.96 per cent), BHEL (1.94 per cent), HDFC (1.75 per cent), Tata Steel (1.69 per cent), RIL (1.63 per cent), Sterlite (1.62 per cent) and NTPC (1.55 per cent).

However, Jindal Steel shot up by 2.57 per cent, M&M 1.82 per cent and Hero Motoco by 1.79 per cent.

Of the Sensex, pack 24 scrips ended with losses and only 6 finished with gains.

The total market breadth at BSE remained negative as 1,569 counters closed with losses, while 1,257 scrips ended with gains. However, the turnover recovered to Rs2,691.01 crore from Rs2,374.85 crore yesterday.`1