Bank stocks lead market fall

Global trends were weak when the markets opened and the indices started on a weak note. Decline in US markets yesterday led to subdued opening in most Asian markets today morning.

After drifting for some time the markets faced fresh selling pressure on news of higher inflation numbers. Reports that SEBI is watching the battle for Reliance more keenly, affected the sentiments further.

Banking stocks, which had opened weak, started to slide which continued for the rest of the day. The BSE Bank Index lost close to 3 per cent today. ICICI Bank was the single largest loser among major stocks. SBI closed with losses of over 3 per cent.

Markets seem to fear that the hike in reverse repo rate by RBI yesterday, would force banks to raise deposit rates. At the same time, banks may not be able to increase their lending rates to the same extent because of competitive pressures. The official notification on EPF interest rate hike worsened the worries, though this was known much earlier.

Lower than expected quarterly numbers from HLL saw further selling in the market as the consumer goods major slipped over 5 per cent.

Both indices lost 2 per cent each. Sensex closed at 6154, down 130 points and the Nifty at 1903, down 39 points. Nifty May futures discount to the spot index narrowed to 20 points from yesterday's 25 points.