High Inflation sends Sensex 493 points lower

GURU PRANESH (FCA(FUTURE CA)) (459 Points)

07 January 2011  

The markets tanked today to close with deep losses for the week. The Sens*x fell 493 points to 19,692 and the Nifty slumped 144 points to 5,904.

Both the major indices fell close to 2.5 per cent. At these levels, the Nifty has fallen below its 100-day moving average of 5,937 which is a sign of weakness.

For the week, both the Sens*x and the Nifty fell 3.75-4 per cent. Small cap stocks fell 3 per cent and midcaps tanked more than 4 per cent.

Global sentiments continued to weigh down on the markets. Domestically, high inflation has made investors edgy over a possible rate intervention by the RBI.

Rate sensitive sectors were the worst hit in trade today. Auto stocks tanked with the BSE auto index slumping 3.26 per cent. For the week, the auto index declined 7.32 per cent. Tata Motors fell 5.52 per cent, M&M declined 4 per cent.

Banking stocks fell 1.4 per cent today but they ended the week 6.5 per cent lower. HDFC fell 3.21 per cent and HDFC Bank declined 2.5 per cent.

Metal stocks tanked 4 per cent on the back of continued weakness in global commodities. Hindalco fell 7 per cent and was the biggest loser on the Sens*x. Sterlite declined 4 per cent and Tata Steel closed 3.35 per cent lower.

Realty stocks declined 1.77 per cent today. For the week they tumbled 6.7 per cent.

IT stocks were also trading deep in the red. The index fell 2.83 per cent. Infosys fell 3.15 per cent.

On the Sens*x, all 30 stocks ended in the red.  The picture on the broader markets was no different. Small cap stocks fell 2.86 per cent and the CNX midcap index declined 2.3 per cent. That reflected on the extremely negative market breadth. Only 7 per cent stocks managed to advance on the BSE 500.

Analysts were downbeat about the coming days as well. Ashu Madan of Religare said, "There is a lack of interest in the markets. Low volumes have damaged sentiments. There are no fresh triggers in the market."

Another analyst said, "The worrying thing is the two key performers of 2010 - banking and auto- have not been able to perform."