Sensex plunges 460 points as rate cut hopes dim

The Sensex and Nifty came under tremendous selling pressure on Friday, while the rupee hit an 11-month low. Reserve Bank of India (RBI) governor D Subbarao on Thursday said inflation was still high and current account gap remained a concern for the Indian economy.

Mr Subbarao's comments dented rate cut hopes. Traders, who had been certain the central bank would cut rates by another 0.25 per cent at its June 17 review, hit the panic button on their terminals.
 
The Sensex traded 461 points or 2.3 per cent lower at 19,755, while the Nifty shed 141 points to 5,983 as of 3.10 p.m. The rupee extended losses to 56.73 against the dollar.

"This was inevitable. More cuts are likely. The market is not in a strong bull run. Levels of 5,820-5,800 are possible on the Nifty," Shardul Kulkarni of Angel Broking said.

Rate sensitive stocks saw strong selling pressure, led by the Bank Nifty, which fell 2.6 per cent. Index heavyweights - ITC (down 4 per cent) and Reliance (down 3.8 pe cent) - traded with deep cuts weighing on markets.

Among banking stocks, Bank of Baroda fell 6 per cent, while Punjab National Bank traded 5 per cent lower.

In-line GDP data for the March quarter failed to lift sentiments on the Street. India's economy grew 5 per cent in 2012-13, its lowest rate in a decade.

Gross Domestic Product grew at 4.8 per cent in the quarter ending March 31. The manufacturing sector grew an annual 2.6 per cent during the quarter while farm output rose just 1.4 per cent.

European shares traded with deep cuts though Japan's Nikkei bounced 1.7 per cent at the end of its worst week in over a year.

(With inputs from Reuters)