Inflation fears drag Sensex down

Dalal Street shed Thursday’s gain and more on Friday as stock prices took a beating following a higher-than-expected rise in the inflat...

Dalal Street shed Thursday’s gain and more on Friday as stock prices took a beating following a higher-than-expected rise in the inflation rate announced by the government. Trading in the red for the entire trading session, the 30-share BSE Sensitive Index (Sensex) ended with a loss of 69.89 points at 4,769.99.

The Sensex index rose 51 points on Thursday on foreign funds buying and subsequent short-covering in the blue chips towards the close of the session. The benchmark index shed 62.72 points, or 1.29%, for the week. The NSE S & P CNX Nifty index shed 20.85 points to end at 1,491.30.

The overall mood on the market remained bearish amid the ongoing worries about the UPA government’s economic policies and fears that inflation may rise on higher coal and petroleum product prices, leading to higher interest rates.

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Data released on Friday showed the wholesale price index rose 5.55% for the year ended June 5, 2004, much higher than analysts’ forecasts for a 5.08% rise. A section of the market feels that the inflation rate of 5.5%-plus may warrant a rise in the interest rates soon.

Besides, there were reports that the domestic mutual funds facing large-scale redemption from corporates. Stocks have been affected by the possible impact of the recent hike in the fuel prices.

While valuations are attractive, investors are awaiting fresh trigger like the budget – which is scheduled on July 8 – to take a fresh view on the market.