Banks, power, metals, realty down post January IIP, CPI inflation data

MUMBAI: The benchmarks broke out of the narrow range on the downside and slipped away from resistance levels on Tuesday even as the Index of Industrial Production (IIP) for the month of January expanded at 2.4 per cent versus a contraction of (-) 0.6 per cent in December.

The decline was led by banks, power, metals and realty space on concerns whether the Reserve Bank of India (RBI) would cut interest rate at its March 19 policy meet.

India’s Consumer Price Inflation accelerated to 10.91 per cent in February compared to 10.79 per cent a month ago due to rise in prices of vegetables, cereals and protein-rich items.

“The market showed weakness post IIP data and CPI inflation numbers. Bad auto numbers and China data spooked metal counters,” said A.K Prabhakar, Senior Vice President - Equity Research at Anand Rathi.

“Negative IIP data on capital goods and high CPI inflation numbers sparked selling seen in banks and rate sensitive sectors,” added Prabhakar.

In case the RBI doesn’t go ahead with a rate cut, the market will be disappointed.

“The RBI obviously has to balance between controlling inflation and looking at growth given that we have had a high interest rate regime for almost two years and inflation still is up there. I do not see any reason for just holding on to inflation rate and cutting down growth,” said Nischal Maheshwari, EVP Research, Edelweiss Securities.

“The growth was down to 4.5 per cent in last quarter. So somewhere RBI has to bite the bullet and go ahead and may be support growth at this point of time because 4.5 per cent is extremely bad,” Maheshwari added.

At 12:40 pm, he Sensex was at 19,520.98, down 125.23 points or 0.64 per cent. It touched a high of 19,697.84 and a low of 19,520.54 in trade today.

The BSE Bankex was down 1.31 per cent, the BSE Power Index declined 1.15 per cent, the BSE Metal Index was 1.14 per cent lower and the BSE Realty Index slipped 1.04 per cent.