Sensex ends 100 pts down on high retail inflation, no rate cut hopes

The Indian markets fellfor a second successive session today to its lowest close since 18 April as banks extended recent losses after high retail inflation in May was seen shutting the door on a rate cut next week.

The BSE Sensex closed at19055.25, down0.46 percent while the Nifty closed at5760.20, down 0.49 percent.

However, there’s still some hope of RBI cutting rates at its next monetary policy review. Kotak Securities economist Indranil Pan told CNBC-TV18, “The currency maybe wobbly, but unfortunately we all know that the currency at least in the case of India has really not been helpful in propelling the export segment in any way.”

The Index of Industrial Production ( IIP) for the month of April grew at 2 percent versus 2.5 percent in March.

Tirthankar Patnaik of Religare Capital Markets feels foreign fund flows into equities could weaken in the near term, as heexpects the rupee to weaken further from the current levels. FIIs have been heavy sellers of government debt over the last three weeks, and market fears this could put further pressure on the rupee, and spark a vicious circle of weakening rupee and FII outflows.

“What we have seen in the debt markets panning out since May 22 or so is now coming into the equity desk,” Patnaik said in an interview to CNBC-TV18.

Titan Industries was the biggest loser closing down 13.32 percent. Thenew RBI rule making it mandatory forgoldimports to be paid in cash upfront will push upTitan Industries’ interest costs, as the company was till now buyinggoldon six months credit, S Subramanian, the company’s chief financial officer told CNBC-TV18.

Tata Power, Coal India, Tata Steel, Hero MotoCorp and Hindalco were the major losers in the Sensex.

Meanwhile, the government announced today that it may unveil measures tomorrow to boost capital inflows into the country, as the rupee hovers around record-low levels. Finance Minister P Chidambaram held a meeting with his top economic advisers on Wednesday to discuss a sharp fall in the rupee, which hit a lifetime-low on Tuesday, reported Reuters.