Interest-rate sensitive realty, bank and auto stocks suffered substantial losses on Thursday, plunging up to 6.4 per cent, as inflation rose to 7.5 per cent in May, dampening hopes of a rate cut by the Reserve Bank of India (RBI) on June 18.
With WPI inflation (rising to 7.5 per cent in May) and food inflation (going up to 10.74 per cent) dashing hopes of a rate cut by RBI, hectic selling emerged in interest-rate sensitive counters pulling Sensex down to 16,658.98.
From the realty space, Indiabulls Real Estate was the biggest dampener as it shed 6.41 per cent, while Unitech declined by 5.70 per cent. Oberoi Realty slipped by 4.45 per cent and DLF was down by 2.20 per cent.
Led by losses in these stocks, the BSE realty index settled at 2.91 per cent lower at 1,594.44.
Market experts said upward revision in May inflation numbers led to weak sentiment, raising doubts on the quantum of rate cut by the RBI, resulting in pressure on rate sensitive sectors.
Among financial scrips, PNB was down 5.49 per cent, Canara Bank lost 4.40 per cent, SBI declined by 3.06 per cent and ICICI Bank shed 3.50 per cent.
Following the downtrend in these stocks, the BSE bankex index ended at 11,338.72, down 2.82 per cent.
"Bank stocks slide on waning hopes of rate cut," Sharmila Joshi Head Equity Fairwealth Securities said.
From auto stocks, Tata Motors skidded 4.56 per cent, Maruti Suzuki shed 2.58 per cent and Bajaj Auto was down 0.76 per cent. The BSE auto index was down 1.99 per cent at 8,983.29.
"Interest rate sensitive bank and realty stocks were the worst performers today. More than expected high inflation rate caused jitters in the market as to the reaction of the Reserve Bank of India in the forthcoming policy meeting on June 18," Shanu Goel Research Analyst Bonanza Portfolio said.
Inflation moved up to 7.55 per cent in May making it tougher for the Reserve Bank to cut interest rates in its policy next week to boost sagging growth.