Sensex closes down 70 points

Stocks erased early gains and dropped 0.4 pct on Friday after IIP only met estimates.

Stocks erased early gains and dropped 0.4 per cent on Friday after factory output growth only met estimates,while participants had hoped for a bigger surprise.

Industrial output in October rose 10.3 per cent from a year earlier,matching Reuters forecasts and suggesting the economy maintained a healthy growth rate after a strong September quarter.

8220;There were expectations built that the IIP number would be higher than what it turned out to be. So the market was disappointed,8221; said Jigar Shah,vice-president of equity sales at Motilal Oswal.

The 30-share BSE index closed down 0.41 per cent,or 70.28 points,at 17,119.03,after rising as much as 0.9 per cent before the data. For the week,it gained 0.1 per cent.

Still,the data reinforced views the economy is picking up steam and the Reserve Bank of India RBI would have to start raising interest rates in the first half of next year.

8220;Recent RBI comments have already indicated that tighter policy is on the way,and this number should reinforce the case for a rate hike early next year,8221; said Brian Jackson,economist at Royal Bank of Canada from Hong Kong.

Banks led the fall,weighed by the rate increase expectations. State Bank of India and ICICI Bank,the country8217;s top two lenders,fell 1.3 per cent and 1.5 per cent respectively.

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Top mobile operator Bharti Airtel dropped 3.2 per cent to Rs 331.35,as investors booked profits after the stock rose nearly 22 per cent over 10 sessions.

State-run engineering equipment maker Bharat Heavy Electricals bucked the trend and rose 3.1 per cent to Rs 2,364 on better order inflow outlook.

Religare Hitches Harrison said this week BHEL would benefit from the increasing private sector orders,rising concerns on Chinese equipment quality and the government8217;s contemplation of domestic procurement for all ultra mega power projects.

The brokerage upgraded the stock to 8216;buy8217; from 8216;hold8217;.

Outsourcer Infosys Technologies climbed 0.4 per cent to Rs 2,454.75 on improving outlook.

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Bajaj Auto,India8217;s second-largest bike maker,raced nearly 5 per cent to Rs 1,724.50,after Goldman Sachs upgraded the stock to 8216;buy from 8216;neutral8217;. The stock hit Rs 1,732 during trade,its highest level since it was re-listed after restructuring in May 2008.

Twenty-three of the main index8217;s components closed in the red,while in the broader market losers outpaced gainers in a ratio of 1.6:1 on moderate volume of 408 million shares.

The BSE index has risen more than 77 per cent in 2009,driven by robust inflows from foreign funds.

The 50-share NSE index closed 0.3 per cent lower at 5,117.30 after hitting 5,182.55,its highest since May 2008.