Sensex unaffected by falling inflation, banking stocks down
Manufacturing products inflation rose as compared to November, dampening sentiments on the Street. The central bank is largely concerned with manufactured products inflation when it reviews monetary policy.
Stocks were largely unaffected after headline inflation slipped to nearly two year lows. The Sensex was down 93 points or 0.58 per cent to 16,061 and the Nifty slipped 33 points to 4,833 at 1205 hours.
December's inflation declined sharply and grew by 7.47 per cent against 9.11 in November on account of the large base effect. However, manufacturing products inflation rose as compared to November dampening sentiments on the Street. The central bank is largely concerned with manufactured products inflation when it reviews its monetary policy. Markets had been rising on hopes that the Reserve Bank would cut rates when it meets later this month.
"The core inflation is above 7 per cent and that is the reason why RBI would be a little cautious," Dr. Shubhada Rao, Chief Economist, YES BANK said.
Most economists agreed that the RBI might not cut rates in January, a possibility that had been driving the markets higher over the last week, though an easing of liquidity might be possible.
"We have been hoping for a rate cut in March. I hope we will have to bring that forward to February based on this number," Glenn Levine, Senior Economist at Moody's Analytics told NDTV Profit today.
Rate sensitive stocks headed lower. Banking stocks underperformed the broader markets, falling over 1.5 per cent. Realty and auto stocks also traded lower in a down market. Tech stocks were the only ones that saw some buying interest today.