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After sustaining marginal gains for most of the session, Indian markets succumbed to selling pressure in the final hour of trade today. Stocks from the banking, commodity and energy sectors were particularly under pressure in the wake of the revised inflation numbers. While the BSE Sensex closed lower by around 26 points (up 0.1%), the NSE Nifty lost around 3 points (up 0.1%). Midcap and smallcap stocks, however, managed to stay in the positive.

As regards global markets, Asian indices closed mixed today while the European indices have opened in the red. The rupee was trading at Rs 46.35 to the dollar at the time of writing.

Just as there were some hopes that India's food inflation is showing signs of cooling off, the numbers are contradictory again. India's food price index rose 16.9% in the year to June 12. This is higher than the previous week's annual reading of 16.1%. This again raises the chances of the RBI hiking interest rates and the government working upon a fuel hike policy. The RBI's attempts to rein in inflation so far have been unfruitful. Only a good monsoon this year can offer some scope for higher food grain production and lower prices.

In a welcome relief to the country's largest infrastructure financer IDFC, the RBI has classified the company as infrastructure finance NBFC. This will help IDFC access cheaper funds. The status given to the company would allow it mobilise funds at lower cost and get flexibility in the infrastructure lending.

It may be noted that in February 2010, RBI had created a separate entity for NBFC - Infrastructure Finance Companies (IFCs) - as infrastructure plays a critical role in the growth of economy. IFCs are not subject to the borrower limits, which restrict NBFCs from lending to any single borrower by 10% of its owned fund, and any single group of borrowers by 15% of its owned fund. IFCs can now raise external commercial borrowings (ECBs) up to 50% of their owned funds automatically. This development will help IDFC grow its loan book in focus segments at more profitable spreads.

As per a business daily, textiles and apparels maker Raymond has closed its home retail business after two years of operations. This is part of a consolidation move that the company has been exercising for over 2 years now. In this attempt Raymond has exited several unprofitable foreign JVs as well. The company is currently concentrating on domestic retailing of worsted fabrics and shirting. 88 new stores were opened during FY10 adding 99,000 sq feet of retail space and this sustained Raymond's position as the largest specialty retailer. The like to like store sales grew by 5% last fiscal. Simultaneously aggressive reviews of the non performing stores during the year resulted in 28 store closures. The company plans to add 200 stores in tier 3 and 4 cities by 2011 mainly through the franchise model.

Source: Indian Markets Thursday Wrap: Inflation Spooks Indian Markets