Rajan's 'disease' remark dampens market

Key benchmark indices edged lower on the last trading session of the week due to profit booking by investors after the Reserve Bank of India (RBI) governor's strong warning on inflation in the previous day leading to believe that the central bank its policy rates high at its macro-policy review meet on January 28.

Brokers in Dalal Street maintained that RBI Governor Raghuram Rajan comments on inflation as a "destructive disease" that was forcing the bank to keep interest rates high dented the market tempo. 

In Delhi on Thursday Rajan said, "The point is inflation is hitting the growth in the long run. There can be no trade-off. There is need to bring inflation down."

That apart, weakness in Asian and European stocks and overnig
ht losses for US stocks also hit sentiment on the domestic bourses adversely.
The market breadth, indicating the overall health of the market, was weak with all the thirteen sectoral indices on BSE dropped.

Effectively, domestic stocks snapped the 4-day winning streak on Friday as the Sensex had garnered 310.04 points or 1.47 per cent in four trading sessions to settle at a record closing high of 21,373.66 on Thursday, from a recent low of 21,063.62 on January 17, 2014. From a 52-week low of 17,448.71 on August 28, 2013, the Sensex has risen 3,684.85 points or 21.11 per cent.

In the day's trade, interest rate sensitive banking, realty and automobile stocks dropped after RBI governor Raghuram Rajan on Thursday called inflation a "destructive disease" that was forcing the central bank to keep interest rates high.
ICICI Bank (down 1.96 per cent), AXIS Bank (down 0.77 per cent), HDFC Bank (down 0.8 per cent) declined. 

Among PSU bank stocks, State Bank of India, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed 2.12 to 5.44 percent.  Canara Bank dropped 6.67 percent as the stock turned ex-dividend today, 24 January 2014, for the interim dividend of Rs 6.50 per share for the year ending 31 March 2014.

Commenting on the market, Kotak Securities' Dipen Shah said, "Markets did react to the weak economic data in China and US.... We believe, markets need to get more comfort on growth and inflation for valuations to improve from current levels.”

Meanwhile, the popular Sensex at BSE lost 240.10 points or 1.12 per cent to settle at 21,133.56, its lowest closing level since January 17, 2014. The index dropped 249.67 points at the day's low in late trade and declined 40 points at the day's high in early trade.

The 50-unit CNX Nifty at NSE lost 77 points or 1.21 per cent to settle at 6,268.85, its lowest closing level since January 17, 2014. The index hit a low of 6,263.90 and a high of 6,331.45 in intraday trade.