Sensex extends weekly slide on inflation jitters

It was the fourth straight day of losses for the Indian market as bears continued their onslaught on Dalal Street. The NSE Nifty closed below the 6050 level with Realty, Capital Goods and Auto stocks among the major laggards. Breadth was negative as the Mid-Cap and the Small-Cap stocks also reversed early gains amid relentless selling pressure. But, select IT and Telecom stocks managed to buck the negative trend.



The Indian market extended this week's losses after a Government report showed that food inflation jumped further in late December, sparking off fears of another rate hike by the RBI later in the month.

Investors also remain wary of the near-term outlook amid a few macro-economic headwinds such as high inflation, hardening interest rates, tight liquidity, tepid FII inflows and a widening current account gap. Also, lack of any significant progress in key policy reforms and the recent deferment of the EGoM decision on oil and urea prices appear to have hurt investor confidence to some extent.

The recent underperformance of India is a bit disconcerting. One has to wait and see whether we can break the current pattern. Momentum and conviction are in short supply these days. But, one should not get unduly worried and have a bit more patience.

"Equity markets in India have been under pressure lately despite a smart rally in the US and European markets. Asian markets also have been trading with gains. Market direction would depend on the quarterly earnings and the outcome of RBI’s policy meeting in the coming weeks," says Amar Ambani, Head of Research (India Private Clients) - IIFL.

The BSE Sensex lost 116 points to close at 20,185 and the NSE Nifty slipped 32 points to close at 6,048.

Among the BSE sectoral indices, the BSE Realty index was the top loser the index lost 2.5%, followed by BSE Capital Goods index was down 2% and the BSE Auto index lost 1.7%.

The broader indices also ended in red, the BSE Mid-Cap index was down 1.2% and BSE Small-Cap index was down 1.1%.

The European indices were trading in the green, the DAX in Germany was up 0.7%, and the CAC 40 index in France was up 0.6% and FTSE index was up 0.4%.

Outside the frontline indices, the big losers in the broader market were BGR Energy, NFL, Ultratech Cem, Hindustan Copper. On the other hand, gainers included Marico, Jain Irrigation, Indian Hotels and IRB Infra.