The Hindu Business Line : Sensex sheds 148 points on buzz over rate hike

STOCK prices failed to maintain last Friday's momentum and surrendered their gains as the BSE Sensex slid by almost 150 points today fearing an interest rate hike by the RBI.

Disappointing results from Ranbaxy and the weak Asian markets also affected market sentiment.

However, small-cap stocks witnessed buying from bargain hunters as investors flocked to buy these stocks, which had been battered over the last one month.

"Selling by FIIs and mixed corporate results may have induced the weakness in the markets," said a note from Motilal Oswal Securities.

Selling pressure: The Sensex opened firm in the morning, taking cue from Friday's close. But the upward move could not be sustained due to selling at higher level. At close the Sensex was down 148.15 points (1.84 per cent) at 7,920 while the NSE's S&P CNX Nifty dropped 48.9 points (2 per cent) at 2394.85.

Ranbaxy Laboratories' results, which were short of market expectations, affected the sentiment. It was severe on pharma stocks with the BSE Healthcare index down by 3.27 per cent, the steepest fall among the bourse's sectoral indices. Bank stocks too were affected on expectation of interest rate hike.

"The market's fall could be due to nervousness about the RBI Credit Policy as well as the fact that FIIs net sales are still continuing," said Mr Arun Kejriwal of KRIS Research. FIIs have been net sellers for the last few weeks and on Friday they sold to the tune of Rs 404 crore.

Tomorrow, the RBI would be presenting the busy season Credit Policy and market expectations were that the central bank would increase the repo rate by 25 basis points.

Small-caps gain: But the most surprising part of today's trading was buying in small-cap stocks, which had been battered the last 3-4 weeks. "It was just value buying in small-cap stocks. Several of them had fallen by more than 50 per cent. One could witness some more buying in these stocks," said a dealer with a domestic broking firm.

The advance-decline ratio was better compared to last week. For every one share that advanced there was one that declined.

Auto stocks shine: Auto stocks were among the few that bucked the trend and closed higher. Bajaj Auto, which came out with impressive second quarter results last week, rose 3 per cent to close at Rs 1,793. Passenger car leader, Maruti was up 2 per cent, closing at Rs 571.

Brokers said the next trend of the market would be decided by RBI's credit policy announcement.

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