10:00AM New York, 7:30PM Mumbai -RBI may raise cash reserve ratio at banks to curb surging inflation. Sensex declined 1.3%.

Indian market highlights

Indian shares fell on Friday on speculation that the Reserve Bank of India may increase reserve ratios for the commercial banks. The RBI Governor YV Reddy on Thursday hinted on a possible increase in the cash banks hold and not lend to borrowers as the central banks look for ways to reduce fast rise in consumer and business credit. The inflation has surged above 8% for the most of the last four weeks and may even reach higher after the recent rise in fuel prices.

In Mumbai trading, the 30-share BSE Sensex fell 1.3% or 197.54 at 15,572.18. On the National Stock Exchange, the broader based S&P CNX Nifty declined 1.1% or 49.15 to 4,627.80.

Of the BSE traded shares, 1,516 shares declined, 1,142 shares gained and 64 were unchanged. Among the 30-member Sensex index, 25 declined while the rest advanced.

Trading statistics

Daily turnover on the BSE stood at 5,229 crore rupees and on the NSE was at 12,589 crore rupees.

Reliance Industries was the most active stock on the BSE with the trading turnover of 386.07 crore rupees followed by Reliance Capital, Cairn India, Gokul Refoils and Anu''s Labs.

IFCI recorded the highest volumes of 1.63 crore shares followed by trading volumes at SpiceJet, Chambal Fertilizers & Chemicals, Gokul Refoils and Ispat Industries.

Inflation leapt above 8%

India''s widely watched wholesale price inflation rate rose 8.24% in the 12 months to May 24, above the previous week''s level of 8.10%. Reserve Bank of India Governor Y.V. Reddy said on Thursday the central bank was ready to employ the full range of tools at its disposal to contain the recent surge in inflation. The inflation is running above the RBI target range between 5% and 5.5%.

After 10 days of debate, the communist-backed ruling coalition on Wednesday agreed to raise petrol and diesel prices by about 10%, more than expected, to help curb losses at its state-owned refiners.

Energy costs account for 14.2% of the inflation index, and the price increases will have a cascading impact on overall prices as diesel and petrol are used for transportation, fuel and power generation.

Fuel price hikes-Protests spread

Strikes and protests against Government''s decision to raise fuel prices spread around the country on Friday, paralyzing transport in two key states and hitting businesses including software firms in Hyderabad and Kolkata. Businesses, schools and road and rail transport were paralyzed for a second day in Kolkata and throughout the West Bengal as opposition party protesters stopped trains and buses.

With elections looming, some state Governments moved to ease the burden on consumers by cutting local duties by a few percentage points, but at the expense of their own budgets and of efforts to curb demand for fuel.

Opposition parties and the Government''s own communist allies have called strikes and protests against this week''s hike in petrol and diesel prices, saying the Government should have done more to protect ordinary people from rising global oil prices.

But the strikes and protests have not gone down well with large segments of the electorate, who understand that international prices are the reason for the current rise in fuel prices. India imports 70% of its crude oil needs.

India and Malaysia were the latest Asian nations this week to raise fuel prices after prices were raised in Indonesia and Philippines.

Gainers and losers