Nifty, Sensex drop 1%; Infosys, ITC outperform

The BSE Sensex and NSE Nifty fell 1% each in afternoon trade due to further fall in rate sensitives, after rising inflation trimmed rate-cut hopes.

The 30-share BSE benchmark tumbled 166.58 points to 16,713.93 and the 50-share NSE benchmark lost 57 points to 5,064.45.

The Indian rupee too was moving towards the 56 level that depreciated by 19 paise to 55.87 as against the US dollar.

Inflation rose to 7.55% for May as against 7.23% in previous month and economists say, even core inflation increased to 4.86% versus 4.77% month-on-month.

Today's number has diminished the chance of a rate cut, says Dipan Mehta, member BSE,NSE. He said the equity market will now react to Greece and other global actions. But HDFC Bank chief economist Abheek Barua believes a rate cut is coming. "A case for rate cut has been built on the back of GDP and IIP numbers as well. May inflation numbers just add to the case," he said.

The BSE Bank and Capital Goods indices dropped 2.5% each. State Bank of India and ICICI Bank, major lenders in India plunged 3% each.

Top commercial vehicle maker Tata Motors and engineering and construction major by sales L&T tanked 4%.

Shares of country's largest power producer NTPC crashed 3.6% while private power producer Tata Power was down nearly 3%.

Index heavyweight Reliance Industries and state-owned oil & gas producer ONGC went down 0.6% each.

However, software services exporter Infosys and cigarette major ITC rose 1% and 0.6%, respectively.

About two shares declined for every share rising on the National Stock Exchange.

On the global front, European markets too extended losses after initial flat trade. France's CAC, Germany's DAX and Britain's FTSE fell 0.7-1% ahead of an Italian bond auction of euro 4.5 billion today and Greek election over the weekend.