NEW DELHI: Equity benchmarks Sensex and Nifty snapped their two-day winning streak on Wednesday after RBI flagged concerns over inflation and fiscal risks amid volatility ahead of the expiry of August series.
The Reserve Bank of India in its annual report for 2017-2018 cautioned on an uptick in headline inflation, warranting continuous vigil. The central bank also noted that worsening global trade environment as a result of protectionist policies may impinge on external demand.
Weakness in the domestic currency too weighed on market sentiment. Rupee in today's trade plunged to an all-time low of 70.60 against the US dollar.
The BSE benchmark Sensex ended the session at 38,722.93, down 173.70 points, or 0.45 per cent. The index had scaled a record high of 38,989.65 earlier in the day.
NSE's Nifty50 shut shop below the 11,700 level, at 11,691.90, 46.60 points, or 0.40 per cent lower. In the 50 share index, 20 stocks ended in the green and 30 in the red.
“In its annual report, RBI appears sanguine about the growth with pick-up in manufacturing and turnaround in capital formation along with strong agriculture output for the third consecutive year. On the other hand, RBI has reiterated concerns related rising inflationary pressures and need to keep vigil", Gaurav Dua, Head of Research, Sharekhan said.
Given the improving growth outlook and inflationary concerns, RBI is expected to toe the hawkish line and probability of another rate hike remain high. This is not good news for equities and accordingly the markets have reacted negatively, Dua added.
Weakness in index heavyweights Reliance Industries and HDFC Bank dragged Sensex lower.
Coal India emerged to be the biggest loser. ONGC, SBI, Tata Steel, ICICI Bank, Tata Motors, ITC and Wipro managed to end the session in the green with gains of up to 2 per cent.
In the Nifty index, gains in PSU Bank, metal and realty stocks were off set by weakness in IT, pharma and media shares.
Despite a sharp decline in the domestic currency, IT stocks bled as the United States of America extended suspension of premium processing for H-1B visas.
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