Stocks entered the `correction’ territory on Wednesday as benchmark indices tanked up to 1.36 per cent after retail inflation raced to a 14-month high of 6.21 per cent in October.

The inflation shock has pushed back expectations of a rate cut to 2025 with some bleak projections made of a cut only in April.

The 50-share Nifty plummeted 324.40 points or 1.36 per cent to 23559.05 on Friday, a fall of 10.34 per cent from its all-time high of 26277.35 in September this year.

Analysts said an index or a stock enters a correction territory when it falls 10 per cent;
if they fall more than 20 per cent from a high, they are in a bear phase.

At the BSE, the 30-share Sensex plunged 984.23 points or 1.25 per cent to close at 77690.95.

During the day, it crashed 1141.88 points or 1.45 per cent to touch a low of 77533.30.

The Nifty was down 324.40 points or 1.36 per cent to 23559.05, a level not seen since June 24.

The markets have been witnessing selling pressure in recent weeks worried over the outcome of US presidential elections, relentless selling by foreign portfolio investors (FPIs) and a spate of weak corporate earnings.

The spike in retail inflation to 6.21 per cent has piled on investor agony, with economists giving up on the Reserve Bank of India (RBI) reducing interest rates in December.

While some feel a cut will happen only in February, others were even of the view that one should expect a cut only in April.

The weary sentiment has spread to infrastructure and capital goods even as banking and rate sensitive stocks took a hit.

“Traditional cyclical sectors came under selling pressure with realty, metals, auto and capital goods facing the maximum brunt. Metal stocks suffered on account of falling metal prices globally after a disappointing stimulus announced in China recently,’’ Deepak Jasani, head of retail research at HDFC Securities said.

The mid- and small-cap stocks were the worst hit, with the BSE smallcap gauge tanking 3.08 per cent and midcap falling 2.56 per cent.

Re stays flat

At the forex markets, the rupee ended flat at 84.38 to the dollar against the previous close of 84.39.

Forex circles said that continued supply of dollars from state-run banks at the behest of the RBI led to the domestic currency moving in a tight range of two paise during the session.
Support also came from falling crude oil and gold prices.

The RBI’s repeated intervention indicates that it does not want the rupee to crash amid a strong US dollar overseas and persistent FPI sales in the equity markets.

At present, the central bank is seen as protecting the 84.45-level.