ALL IN THE RED: SENSEX SHEDS 468 PTS

Global investors flee Street as rate hike fears loom

HDFC Bank and developer DLF led the fifth straight day of declines in equities as global investors fret over the potential increase in interest rates by the central bank to tame price rise.
    With global commodity and crude oil prices rising on revival of demand in the US, analysts believe that Indian companies' earnings would be hit due to high input costs.
    "Unrelenting inflation and high oil prices are the real concerns which will continue to weigh on the sentiment in next two-three months," said Edelweiss Capital Chairman and Managing Director Rashesh Shah. The government is trying hard to remove supply bottlenecks in its attempt to control soaring prices, he said.
    The benchmark Sensex fell 2.4% to 19,224.12 and the S&P CNX Nifty shed 142 points. The benchmarks are off 8.5% since their peaks last November. All sectoral indices on BSE fell. An average of 3.4 shares declined for every share that rose. As many as 28 of the 30 Sensex components fell.
    Foreign funds sold shares worth 1,139 crore on Monday, taking their total sale this month to 1,747 crore, data with exchanges show.
    Indian shares are more affected than other emerging markets because they are trading at a premium to others after a record $29-billion investment by overseas funds in 2010. Their earnings growth could slow in the quarters ahead as they pay more for raw materials and for funds.
    The Reserve Bank of India, in its review on January 25, may raise borrowing costs again after increasing it six times last year to battle inflation. The repo rate—the rate at which the central bank lends to banks—is at 6.25%.
    The food price index soared to a 23-week high to 18.3% for the week ended December 25 with no signs of any easing after unseasonal rains hurt crops. This is leading to a price rise spiral extending to manufacturing goods too.
    Manufacturers of cars and motorcycles, and restaurateurs are raising prices across the board as they attempt to remain profitable.
    The Sensex is now at a one-month low after the second biggest fall this year. Among sectoral indices, BSE's realty index tumbled 3.6%, followed by capital goods, consumer durables and banking that fell more than 3%.
2011: Street Signals
FOR ANY investor globally, the start of each year gives rise to hope and fear on the returns they will make on investments. Read on to know what 2011 has in store for us. PAGE 15