Benchmark indices Sensex and Nifty ended lower on Friday, snapping a three-day rally amid anticipation of a policy rate hike by the RBI next month after retail inflation surged to 6.09 per cent in October.
The 30-share BSE Sensex dropped 318.56 points, or 0.39 per cent, to settle at 81,592.45. During the day, it tumbled 622.26 points, or 0.75 per cent, to 81,288.75. The 50-share NSE Nifty closed 155.05 points, or 0.61 per cent, lower at 25,144.30.
This is the first major decline for both the benchmark indices this month. Among the Sensex firms, Mahindra & Mahindra, UltraTech Cement, Bharat Electronics, NTPC, Trent and HDFC Bank were among the major laggards.
Hindustan Unilever, Asian Paints, Bharti Airtel and Reliance Industries were among the winners.
Retail inflation surged to 6.09 per cent in October, breaching the Reserve Bank of India's upper tolerance limit for the first time in two years and prompting economists to anticipate a policy rate hike by the central bank next month.
The consumer price index (CPI) based retail inflation rose to 5.54 per cent in September, as a sustained uptick in food and beverages (F&B), restaurant services and transport inflation played a key role in pushing up the October headline number.
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Data released by the Ministry of Statistics and Programme Implementation showed that food inflation spiked to 8.94 per cent in October from 7.74 per cent in the previous month.
"The current correction suggests that markets are increasingly uncomfortable with the combination of elevated inflation, currency depreciation and rising crude prices. While global uncertainties are adding to the cautious sentiment, the bigger concern is the potential second-order impact of higher energy prices on corporate margins, consumption and India's current account deficit," Vikram Kasat, Chief Business Officer – Advisory and Dealing at PL Capital, said.
With inflation moving beyond the RBI's comfort band, expectations of monetary easing could also be pushed further out, limiting the scope for a sustained market recovery, he added.
"Indian equity markets closed lower on Friday, snapping their three-day winning streak as investors resorted to profit-booking following the recent extended rally. Sentiment was dented by October retail inflation surging to 6.09 per cent, breaching the RBI's upper tolerance limit and raising concerns over a potential repo rate hike in December," said Ponmudi R, CEO of Enrich Money, an online trading and wealth tech firm.
On the macro front, crude oil and rising US bond yields continued to weigh on domestic equities, he added.
Meanwhile, Foreign Institutional Investors (FIIs) bought equities worth Rs 7,830.60 crore on Thursday, according to exchange data.
Brent crude, the global oil benchmark, remained flat at USD 95.76 per barrel.
In Asian markets, South Korea's Kospi, Shanghai's SSE Composite index and Hong Kong's Hang Seng index ended lower, while Japan's Nikkei 225 settled in positive territory.
Markets in Europe were trading marginally higher. The US equity markets ended lower on Thursday.
On Thursday, the Sensex advanced 31.61 points, or 0.04 per cent, to settle at 81,911.01. The Nifty was up 44.30 points, or 0.18 per cent, to end at 25,299.35.
Disclaimer: This story has been directly published from the agency feed (PTI). No changes have been made except the headline.