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Sensex falls for third day on high inflation

Mumbai: The BSE benchmark Sensex fell for the third consecutive day on Thursday, down over 116 points on sustained selling by investor on concerns that spike in food inflation would lead to higher interest rates, making borrowing costly for corporate as well as consumers.

Opening on a positive note, the Bombay Stock Exchange index, Sensex, closed 116.36 points, or 0.57 per cent, down at 20,184.74 as stocks of interest rate related sectors like realty, auto and banking declined.

The barometer, which had lost nearly 260 points in the last two sessions, touched the day`s low of 20,107.17.

The broad-based National Stock Exchange index Nifty also lost 31.55 points, or 0.52 per cent to close at 6,048.25. It rose to 6,116.15 and touched a low of 6,022.30 points during the session.

Selling pressure gathered momentum soon after the reports of the release of food inflation data and the International Monetary Fund saying that the RBI may have to keep raising policy rates to combat inflation.

Soaring onion and other vegetable prices led to a sharp rise in inflation at 18.32 per cent for the week ended December 25, a development that might prompt the Reserve Bank to tighten monetary policy to tame further hike in prices.

The RBI raised policy rates six times in 2010 to rein in inflationary pressures in the economy, which grew 8.9 per cent in the quarter ended September 30.

The realty sector index suffered the most by losing 2.41 per cent to 2,713.74 on fears the RBI rate hike in interest rate would directly impact on the sale of homes.

The capital goods, a segment of heavy machinery was down by 1.88 per cent to 14,912.81 followed by auto sector index by 1.59 per cent to 9,806.13. Consumer durable index lost 1.41 per cent to 6,312.31.

The banking sector index lost 1.14 per cent to 12,687.51 as segment major State Bank of India, a largest lender dropped to its lowest level in five-month by losing 2.67 per cent to Rs 2,625.20.

Barring IT and Tech, all sectoral indices closed with losses. In the 30-BSE index components, 19 stocks fell while 11 gained.

However, gains in IT and tech sectors on hopes of a better returns this quarter on improving US economy, saved the market from further fall. Over 40 per cent revenue of Indian software companies comes from the US markets.

As the selling pressure spread over a wide-front, midcap sector index lost 1.18 per cent to 7,661.48 and smallcap index by 1.04 per cent to 9,639.15.

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