Markets slip as rate cut hope fades

Markets ended marginally lower on Wednesday, amid a volatile trading session, as rising consumer price inflation dashed hopes of a rate cut by the central bank.

The 30-share Sensex ended down 32 points at 19,355 and the 50-share Nifty closed 11 points lower at 5,888.

Industrial production growth rate bounced back to a 16-month high of 8.2% in October on good performance of the manufacturing, power sector and higher output of capital as well as consumer goods, indicating sudden recovery in the economy.

The factory output, as measured by the Index of Industrial Production (IIP), contracted by 5% in October last year. The IIP had expanded by 9.5% in June 2011.

Rising for the second consecutive month, retail inflation surged 9.90% in November driven mainly by rising prices of food items such as sugar, vegetables, edible oil and clothing. The retail inflation was 9.75% in October and 9.73% in September.

Asian stocks firmed up on the back of agreement on the US cliff and that the US Fed would resort to more asset buying.

The Shanghai Composite was up 0.4%, Hang Seng gained 0.8% and Straits Times was up 0.7%. The Nikkei ended up 0.6%.

European shares were trading mixed ahead of the US Fed's decision. The FTSE and CAC-40 were up 0.2% each while CAC-40 was trading flat with negative bias.

Among the sectoral indices on the BSE, Capital GOods index was the top loser down 1% followed by power, metal, banks and FMCG. Consumer Durables and Auto indices were among the top gainers.

In the Sensex pack, mortgage lender HDFC was the top loser down 1.7% at Rs 860 after rising consumer price inflation dashed hopes of a rate cut by the central bank.

Larsen and Toubro ended down 1.2% on profit taking after the stock rose from Rs 1,550 levels since Nov 20.

Hindustan Unilever was the top Sensex loser down 2.7% at Rs 530 following concerns over increase in royalty payouts.

Investors were jittery following announcement by parent Unilever that it was increasing royalty to 5% of sales from the current 3.5% in Indonesia.

Other Sensex shares which declined include, ONGC, ICICI Bank and BHEL.

Mahindra and Mahindra ended up 2.2% at Rs 948 tracking gains of its group company Tech Mahindra which rallied on reports that more than 7% of total equity of the company (Tech Mahindra) changed hands via bulk deals.

Two-wheeler majors Hero Honda and Bajaj Auto ended over 2% each on hopes that sales growth during the third quarter (Oct-Dec) would continue to remain strong on the back of demand during the festive season.

Among the heavyweights, Reliance Industries gained 1.5% and ITC ended 0.7% higher at Rs 306.

Among other shares, Tech Mahindra rallied 3.7% to Rs 911 on reports that more than 7% of total equity of the company has changed hands via bulk deals.

Mahindra Satyam surged 6.4% to end at Rs 104 after the Andhra Pradesh High Court (HC) stayed the order issued by the authorities of Enforcement Directorate (ED) that attached Rs 822 crore cash reserves of the company lying with various banks in Hyderabad.

ABG Shipyard ended higher by 1.2% at Rs 375 after the company said it has received an order from Indian Navy worth Rs 485 crore for the construction of Cadet training ship.

"The company has signed a repeat order for construction of one additional Cadet Training Ship for Indian Navy (Ministry of Defence)  valuing Rs 485 crore," ABG Shipyard said in a statement.

In the broader market, the BSE Mid-cap ended flat at 0.06% while the Small-cap index ended 0.2% higher.

Market breadth was nearly neutral with 1,494 losers and 1,433 gainers on the BSE.