Sensex dips on rate tweak, FII sell off

March 19, 2011 - PRLog -- Fears of further hike in interest rates, which could lead to lower corporate profitability, combined with selling by foreign funds, pulled the market down on Thursday. The sensex, which closed lower on the back of a sell off on Wall Street on Wednesday, remained in the red through the session and picked up losses in late session to close 209 points off at 18,150.

In Thursday's policy review meeting, RBI said targeting inflationary pressure was the main objective of its monetary policy, and in doing so, it was ready to compromise on growth. There were also indications that rates will be hiked further, all of which did not go down well with investors on Dalal Street and hence the selling, analysts said.

The day's session saw FIIs logging a net outflow of about Rs 1,130 crore, its biggest single-session outflow since February 24. Dealers said after the rate hike by RBI, companies from all the interest sensitive sectors, like auto, financial services, real estate and consumer durables, will find it tougher, although the effect will be felt across sectors. In Thursday's market, among the sensex stocks, auto major Maruti lost 4.4% to Rs 1,169 while HDFC, the home loan major, lost 3.7% to Rs 637 and Hindalco lost 2.5% to Rs 198. Maruti's loss, however, could also be attributed to the earthquake and tsunami in Japan, where its parent Suzuki is located and from where the Indian company imports parts and cars.

Jyothy Laboratories, which bought nearly 15% stake in Henkel India, was down 11.8% at Rs 203 as investors feel its decision to buy the holding n the company in which its German parent has a majority stake, could backfire. Henkel India has huge debts and is also finding it tough to grow its business.

Around the globe, Nikkei lost 1.4%, while Hang Seng was off 1.8%, mainly because of the rising concerns about the nuclear radiation leakages in Japan and its impact on the economy. In Europe, FTSE was up 1.7%, while DAX in Germany was up 2.1%. And in the US, in mid-session, Dow Jones index was trading 1.2% while the broad-based S&P 500 trading 1.3% higher.

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