RBI Governor D Subbarao dashes interest rate cut hopes, Sensex closes 169 pts down

The BSE benchmark Sensex today fell for the first time in three days by slipping 169 points to 19,817.63, dragged down by auto, banking and realty stocks as rate cut hopes were dented by RBI Governor D Subbarao's view that inflation is "still high".

The 30-share Sensex fell by 169.19 points, or 0.85 per cent to settle at 19,817.63. Rallying 324 points in previous three sessions, index had crossed 20,000-mark after two years in yesterday's trade on the back of rate cut hopes, signs of corporate earnings and postponement of GAAR.

The broad-based NSE index Nifty also ended 54.75 points, 0.90 per cent, lower at 6,001.85.

"When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus... Inflation has come down, (it is) still high," Subbarao said while addressing students last evening in Lucknow.

RBI will meet on January 29 to review monetary policy.

With rate cut hopes dashed, ICICI Bank and SBI closed around 2 per cent lower. Auto majors Tata Motors, M&M and Maruti Suzuki shed around 3 per cent each in heavy selling.

Overall, 12 out of 13 sectoral BSE indices closed lower.

"Statement from RBI Governor D Subbarao indicating that inflation is still towards higher range dampened hopes of rate cuts and led to selling pressure in all major sectors," said Nidhi Sarswat, Senior Research Analyst, Bonanza Portfolio.

Among realty stocks, DLF shed 1.5 per cent while Sobha Developers, Unitech and Anant Raj lost 3.7-4.5 per cent in the BSE Realty index. Metal pack was also under pressure with Hindalco, which lost over 4.3 per cent, the worst performer in

Sensex. Tata Steel and Jindal Steel also closed lower.

Besides, a weakening trend in the Asian region and lower opening in European markets also triggered selling in Indian stocks. Shares of Infosys, which had been in the limelight in the past few sessions, succumbed to profit booking. However, TCS rose 1.03 per cent.

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