Indian shares end down as inflation hits fresh record

Mumbai: Indian shares fell 0.4 per cent on Friday in seesaw trade as investors were wary after inflation hit its highest in seven years and raised the prospect of more monetary tightening ahead.

Ranbaxy Laboratories bucked the trend and rose more than four per cent on a newspaper report that Pfizer may make a bid for the Indian drug maker, countering a $4.6 billion deal by Japan's Daiichi Sankyo for a controlling stake.

Its shares ended up 4.3 per cent at Rs566.90, their highest close in three-and-a-half years, after rising as high as Rs574.25 during trade. Daiichi dropped two per cent in Japan.

The 30-share BSE index ended 60.58 points down at 15,189.62, with 21 components in the red, after rising as much as 0.6 per cent in early trade.

For the week, the benchmark was down 2.5 per cent, taking losses this year to a quarter.

In the broader market, 1,443 gainers beat 1,157 losers on volume of more than 325 million shares.

Shaky sentiment

Traders said the overall sentiment was shaky after annual inflation at the end of May hit 8.75 per cent, its highest since February 10, 2001.

With last week's increase in state-set fuel prices expected to push up inflation to double-digits in early June, there was concern the central bank may tighten policy again after raising a lending rate on Wednesday.

"Inflation weighed on the market today, but it also drew some comfort from yesterday's industrial data," said Gajendra Nagpal, chief executive at Unicon Financial, an investment advisory firm.

"Next week is likely to be range-bound and I don't expect a sharp rally, if oil prices stay where they are, I don't see a sharp fall too," he said.

"We see headline inflation crossing 10 per cent (this) week and remaining around 9.5 per cent in June and July," said A. Prasanna, economist at ICICI Securities. "With this kind of inflation behaviour, we do not rule out further policy action in the July review."

State Bank of India fell 0.4 per cent to Rs1,334.55, ahead of its review of interest rates. HDFC Bank fell 3.5 per cent to Rs1,123.35.

The 50-share NSE index fell 0.49 per cent to 4,517.10.