BSE Sensex and Nifty fell sharply on Monday despite wholesale inflation falling to nearly 5-year low of 3.74 per cent in August.
The Sensex ended 244 points lower at 26,816.56 while Nifty fell 63 points to 8,042. The selling pressure was broad-based barring some defensive buying in some pharma stocks. Among major Nifty losers, TCS, UltraTech Cement, and Kotak Mahindra Bank fell nearly 2 per cent. Metal shares fell sharply on weak China output data. Hindalco fell 3 per cent while JSPL slumped 4.7 per cent.
The broader markets however attracted some buying activity. The BSE smallcap index rose nearly 0.70 per cent while the midcap index rose 0.2 per cent.
Market analyst Sanjeev Bhasin said Indian stocks are showing signs of exhaustion, with weakness in emerging market currency, slump in July industrial output growth weighing on the sentiment.
He sees Nifty consolidating in the 8000-8200 range.
India’s industrial output growth hit a four-month low in July when it grew at much slower-than-expected 0.5 percent year-on-year. Retail inflation, which the Reserve Bank of India (RBI) tracks for setting lending rates, edged down marginally to 7.8 per cent in August from 7.96 per cent a month earlier. The retail inflation and factory output data was released after market hours on Friday.
Investors also remained cautious ahead of the Federal Reserve meet later this week. Weak global markets also weighed on the sentiment. Recent string of strong US economic data added to concerns the Federal Reserve could raise interest rates sooner than some investors had expected.
Any decision by the US Federal Reserve to raise rates, which have been held near zero since December 2008, will have implications for India, as it could lead to capital outflows, weakening the rupee and inflating costs of imported commodities.