Sensex, Nifty Snap 3-Day Winning Run as 6.09% Inflation Raises December Rate Hike Fears

Indian stock markets snapped their three-day winning streak on Friday, with benchmark indices closing lower as a sharp rise in retail inflation fuelled concerns over a possible Reserve Bank of India (RBI) interest rate hike next month.

The BSE Sensex dropped 318.56 points, or 0.39 per cent, to settle at 81,592.45, while the NSE Nifty declined 155.05 points, or 0.61 per cent, to close at 25,144.30. During the session, the Sensex had plunged 622.26 points to an intraday low of 81,288.75 before recovering some losses.

Investor sentiment weakened after India's retail inflation surged to 6.09 per cent in October, compared with 5.54 per cent in September. The reading breached the RBI's upper tolerance limit of 6 per cent for the first time in two years, raising expectations of a possible policy rate hike in December.

Food inflation added to the concerns, climbing to 8.94 per cent in October from 7.74 per cent in the previous month.

Higher crude oil prices, rupee depreciation and rising US bond yields also weighed on domestic equities. Brent crude, the global oil benchmark, remained largely unchanged at USD 95.76 per barrel.

Among Sensex constituents, Mahindra & Mahindra, UltraTech Cement, Bharat Electronics, NTPC, Trent and HDFC Bank were among the major laggards. Hindustan Unilever, Asian Paints, Bharti Airtel and Reliance Industries ended higher.

Sectorally, Realty stocks led the losses, falling 1.70 per cent, followed by Auto (1.19 per cent) and Commodities (1.11 per cent). Meanwhile, the BSE MidCap Select and SmallCap Select indices gained 0.09 per cent and 0.02 per cent, respectively.

Market breadth remained negative, with 2,462 stocks declining against 1,965 advances on the BSE. Foreign institutional investors had purchased equities worth Rs 7,830.60 crore on Thursday.