Sensex drops 71 points but holds 17K

The BSE Sensex on Thursday fell 71 points as global banking giant Citigroup downgraded its earning forecast of 30-Sensex listed companies on account of high borrowing costs, and food prices peaked to over four-month high, fanning fears of RBI hiking rates next month.

After the Wednesday's rally, the fall in Bombay Stock Exchange's bellwether index, which closed at 17,059.40 in a volatile trade, was also led by nagging concerns over the resolution of the US and European debt problems.

ICICI Bank, which was among the 5 volume toppers in terms of shares exchanged during the day, contributed the most to the Sensex fall, declining over 2 per cent, followed by largest Indian telecom company Bharti Airtel, which closed 2.42 per cent lower.

Tata Power that was the third most influential in the Sensex fall, also suffered the maximum losses at 4.31 per cent.

The Sensex, which had gained 273 points in the previous sessions, touched the intraday high of 17,207.82 but fell on emergence of profit booking across the board and a steep rise in food inflation.

Food inflation climbed to a four-and-half month high of 9.90 per cent in the last week of July, increasing the burden on households on the back of costlier onions, fruits and protein-based items.

The rise in food inflation despite the RBI's 50 basis point hike in its last meeting, raised concerns that the central bank may again have to raise the lending and borrowing rates to wipe off inflationary pressures, partly caused by excessive demand.

--With PTI inputs