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Basket selling drags indices
Thu, 24 Feb 11:30 am

After starting today's session on a negative note in the morning Indian indices have failed to recoup losses in the previous two hours of trade and are currently trading in the red. All the sectoral indices are in the red with stocks from the consumer goods and consumer durables space leading the pack of losers.

Currently, the BSE-Sensex is down by 273 points while NSE-Nifty is trading 71 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 1.49% and 1.29% respectively. The rupee is trading at 45.45 to the US dollar.

Banking stocks are trading weak with Kotak Bank and DCB leading the pack of losers.ICICI Bank and HDFC Bank, the country's two leading private sector lenders have increased their lending rates by up to 50 basis points, making home, auto and commercial loans dearer. While ICICI Bank has hiked the base rate, the minimum lending rate, by 50 basis points (0.5%) to 8.25%, HDFC Bank has raised the same by 45 basis points to 8.20%. ICICI Bank has also increased the deposit rates by up to 50 basis points across various maturities. RBI has raised the short-term lending and borrowing rates (repo and reverse repo) seven successive times since April, 2010 to 6.5% and 5.5% respectively. These moves were aimed at combating the rising inflation in the economy. So far, over a dozen banks, including SBI, Punjab National Bank, Bank of Baroda, Union Bank and Indian Overseas Bank had revised interest rates since the third quarterly review of the monetary policy by the RBI.

Protests against high food prices have now reached New Delhi, after hitting the Middle East and Africa. A least 50,000 people, representing trade unions of various parties marched through the streets of the nation's capital, demonstrating against high food prices. This comes a less than a week before the latest Union Budget is due, piling additional pressure on the UPA government. India is home over a billion people, and has been grappling with double-digit food inflation. Millions of poor have been the worst hit in this crisis. The RBI in turn raised interest rates seven times to tame rising inflation. However, much of the problem stems from bad weather problems and supply side issues.

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