Sensex ends 186 points down as high inflation sparks rate hike fears

A surge in inflation could result in a harsher hike of key interest rates by the Reserve Bank of India, which has already said it will continue to combat high inflation by maintaining a hawkish monetary policy.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 18,492.68 points, closed at 18,345.03 points -- down 186.25 points or 1.01 percent from its previous close at 18,531.28 points.

India's annual rate of inflation slipped a tad to 8.66 percent in April, compared to 9.04 percent recorded in the previous month, according to official data released Monday.

The fall in inflation was because of a high base recorded in the like month of last year at 10.88 percent.

The 50-scrip S&P CNX Nifty of the National Stock Exchange ended at 5,499 points, down 0.83 percent.

Broader markets ended weak, with the BSE midcap index closing 0.77 percent down and the BSE smallcap index 0.74 percent down.

Oil marketing companies had increased petrol prices by Rs.5 per litre Saturday.

Interest rate sensitive stocks like auto, banking and realty stocks were among top losers at this time.

The market breadth was tilted towards the negative with 1,052 stocks advancing, 1,713 on the decline and 134 unchanged.

Among the gainers on the Sensex were: Hero Honda, up 3.87 percent at Rs.1,864.95; BHEL, up 0.93 percent at Rs.2,050.65 and Bharti Airtel, up 0.83 percent at Rs.370.25.

Among the losers were: Jaiprakash Associates, up 3.2 percent at Rs.84.75; Bajaj Auto, up 2.72 percent at Rs.1,300.85; M&M, down 2.71 percent at Rs.673.15 and Tata Steel, down 2.64 percent at Rs.578.30.

Concerns of the Greece sovereign debt crisis worsening spooked traders at Asian markets.

The Nikkei of the Japanese stock exchange closed 0.94 percent lower at 9,558.3 points, while Hong Kong's Hang Seng ended 1.36 percent down at 22,960.63 points.

The Shanghai Composite index of the Chinese markets too shut shop 0.77 percent down at 2,849.07 points.

European markets fell as investors feared the sovereign debt crisis faced by countries like Greece would not be resolved soon after the arrest of International Monetary Fund chief Dominique Strauss-Kahn in New York over sexual assault charges.

Britain's FTSE was down 0.88 percent at 5,873.67 points.

Around midday, the French CAC 40 was trading 1.45 percent lower at 3,960.7 points, while the German DAX was ruling 1.33 percent down at 7,304.99 points.