Markets open weak on global cues, fear of rate hike

• The key benchmark indices drifted lower amid initial volatility on weak Asian equities. Investors are cautious because the central bank is seen raising key short-term interest rates by a minimum 25 basis points at its annual monetary policy review at 11:30 IST today.

• The barometer index – the BSE Sensex and the 50-unit S&P CNX Nifty hit their lowest level in more than 5 weeks. The Sensex was down 70.50 points or 0.37 percent to 18,927.52.

[caption id=“attachment_3733” align=“alignleft” width=“380” caption=“Interest rate-sensitive auto and bank stocks decline. Getty Images”]  [/caption]

• Index heavyweight Reliance Industries (RIL) slipped on reports the upstream regulator has asked the company to drill more wells to reverse the decline in production of natural gas from the KG-D6 field.

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• Interest rate-sensitive auto shares declined on concerns that higher interest rates could crimp sales going ahead.

• The market breadth, indicating the health of the market, was almost even. On BSE, 827 shares advanced while 823 shares declined. A total of 55 shares remained unchanged.

• India’s largest tractor maker by sales M&M lost 1.55 percent to Rs 729.50 and was the top loser from the Sensex pack. Sales at the company’s automotive division rose 23 percent to 32,090 vehicles in April 2011. Domestic sales grew 21 percent to 30,349 while exports more than doubled to 1,741 units. The company sold 15,459 units of its utility vehicles Bolero, Scorpio and Xylo and sedan Verito, up 20 percent from a year earlier. Total sales of tractors were up 14 percent at 18,530 units.

• India’s second-largest bike maker by sales Bajaj Auto shed 1.02 percent. Total sales rose 17 percent to 3.67 lakh units in April 2011 over April 2010. The company announces its Q4 March 2011 result on 18 May 2011.

• The RBI after trading hours on Monday said risk to economic growth from high persistent inflation could dictate the monetary policy in the near term. This means the central government is likely to increase interest rates in an effort to curb inflation. The inflation path remains sticky and inflation may go up even further, the central bank said in its report titled ‘Macroeconomic and Monetary Developments in 2010-11’. Upside risks to inflation arise from high oil and other commodity prices, incomplete pass through and it’s likely impact on fiscal deficit, elevated inflation expectations and price stickiness, the RBI said.