Sensex on slippery ground

For investors on the Bombay Stock Exchange, today was a Fryday. Having opened at 18708, the market nosedived 473 points at one time to 18235. However, towards the close sentiments showed some improvement and the Sensex closed 288 points (1.54 per cent) below its previous close of 18684.

Was it a reason to panic? Not really. The week saw the Reserve Bank of India sounding hawkish while reviewing the credit policy. Having hiked repo and reverse repo rates and also its projection for inflation, from 5.5 per cent to seven per cent in March 2011, we are in a high growth - high inflation situation. The RBI itself now holds a more pessimistic near-term inflation view, which further provides ground for
higher rates. This would have a bearing on interest rate sensitive sectors like real estate, capital goods and automobile. Evidently, today, the sectoral indices at BSE; Realty, Consumer Durables , Auto, and Capital goods marked a decline of 4.96 per cent, 3.91 per cent, 3.56 per cent and 3.06 per cent respectively.

Since the beginning of the week, the Sensex has lost 755 points (3.96 per cent). And in 2011, the Sensex has lost 2113 points and foreign institutional investors (FIIs) have been net sellers to the tune of $ 964 million, as on January 28.