Holding on

Mumbai, Aug. 20: A bulging inflation figure left the stock market bruised and bond market on tenterhooks today.

Friday being a holiday on account of Parsi new year, the bond market could not react to the announcement of another rise in the inflation rate to 7.96 per cent. However, treasury circles expect a knee-jerk reaction when it opens for trading on Monday. Share prices, on the other hand, went for a free-fall.

Analysts, however, feel that yields on government securities will stabilise as the country's inflation rate has reached its peak and will settle down over the coming days.

Sources said yields on the benchmark 10-year security may not rise beyond 6.60 per cent. On Thursday, it closed at 6.49 per cent against the previous close of 6.55 per cent as many felt that the inflation rate was set to come down.

“There may be a knee-jerk reaction to the inflation numbers announced today, which are in line with market expectations. However, inflation should start tapering off',” said Tarini Vaidya, country treasurer of Centurion Bank.

Bond market circles had expected the government to announce a 30 basis points rise in inflation figure. They now expect the rate to settle at present levels as oil companies have not raised prices.

On the bourses, inflation worries coupled with spiralling crude prices sent the BSE sensex tumbling a whopping 58.99 points to close at 5064.66. This came after yesterday's rally of over 80 points.

The sensex opened at higher at 5128.10 against Thursday’s close of 5123.65 and moved down to a low of 5047.75. It recovered marginally to close at 5064.66, a net fall of 1.15 per cent.

Most of the index heavyweights, including Reliance, Tata Motors, ITC, Maruti Udyog, State Bank and Tata Steel, finished with losses. There were some profit selling in steel shares on news that the government had abolished import duty on iron and steel scrap and reduced excise on non-alloy steel.

The volume of business was higher at Rs 1,540.66 crore against Thursday’s Rs 1,524.43 crore. Tata Motors was the most active scrip with the highest turnover of Rs 144.33 crore, followed by RIL (Rs 130.36 crore), Tisco (Rs 110.05 crore), Maruti (Rs 78.03 crore).