Mumbai: The BSE Sensex and NSE Nifty tanked more than 1 per cent on Thursday as rising inflation for May diminished hopes of further monetary easing and weak European markets added fuel to the fire.
The BSE benchmark fell as much as 221 points intraday, before closing down 202.63 points at 16,677.88, which shot up more than 900 points in previous seven out of eight sessions. Meanwhile, the NSE benchmark slipped 66.70 points or 1.3 per cent to 5,054.75.
Banks, capital goods, metals, auto and power stocks took a beating.
Inflation for May rose to 7.55 per cent as against 7.23 per cent in previous month that certainly dampened hopes of rate-cut by the Reserve Bank of India in its mid-quarter policy review on June 18, say experts. However, experts still feel the RBI may surprise on Monday.
CRISIL Research has revised its average inflation forecast for 2012-13 up to 7 per cent, from its previous expectation of 6.5% that reflects the higher-than-anticipated increase in food inflation, and the impact of the weak currency on imported component of inflation.
"Although overall inflationary pressures continue to remain high, the Reserve Bank of India could announce a rate cut in its mid-quarter monetary policy review on June 18, aimed at lowering cost of credit and reviving business sentiments in the scenario of weakening growth," says CRISIL.
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