Erasing initial gains, the
BSE benchmark Sensex fell 151 points on selling by funds in interest-rate linked stocks amid fears that the Reserve Bank may hike its lending rate further to tame inflation.
The BSE 30-share barometer, which had lost 148 points on Thursday, fell further by 151.25 points or 0.89 per cent to 16,785.64, wiping off early gains.
The broad-based National Stock Exchange index Nifty also fell 41.95 points or 0.82 per cent to 5,049.95, after touching the day's high of 5,120.75
Realty and metal stocks suffered major losses.
Brokers said trading sentiment was subdued ahead of RBI's meeting on monetary policy review next week. It has raised lending rates 12 times since March, 2010 to tame the rate of price rise.
Still, the food inflation was up at 10.60 per cent for the week ended October 8, from 9.32 per cent in the previous week. The overall inflation was 9.72 per cent in September, much above RBI's comfort level of around 5 per cent.
Brokers said investors also squared their positions ahead of the expiry of the monthly derivatives contact.
Globally, the trend was mixed in the Asian region and European markets opened higher.
The realty sector index suffered the most by losing 1.99 per cent to 1,772.54.
The banking index fell 0.67 per cent to 11,094.31 and auto index lost 0.20 per cent to 8,848.17.
The fall in the market was led by heavyweights Reliance Industries, Infosys, Bharti Airtel, Tata Motors, Tata Steel, Larsen and Toubro, HDFC Ltd. and ICICI Bank. Of the 30 scrips in the index, 23 closed with losses.
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