The market sentiment also dampened after US Fed said on September 20 that there could be a small stimulus reduction at its next meeting in October.
Mumbai: The S&P BSE Sensex snapped four weeks of gaining spree, dropping sharply on profit-bookings and concerns that RBI would hike rates further to curb high inflation.
After riding high on the back of a month-long rally, the Sensex tumbled 536 points to end the week at 19,727.27.
The market sentiment also dampened after US Federal Reserve Bank said on September 20 that there could be a small stimulus reduction at its next meeting in October.
RBI, under its new Governor Raghuram Rajan, last week unexpectedly raised the repo rate to 7.5 percent from 7.25 percent, saying inflation had to be lowered to more tolerable levels. As a result, markets reacted sharply and shares tanked heavily.
Bank stocks fell after global rating agency Moody's cut the senior unsecured debt and local currency deposit rating of State Bank of India, the country's largest lender.
The market mood was choppy with participants churning their portfolios due to expiry of monthly derivative contracts on Thursday, brokers said.
The Sensex resumed lower at 20,060.82 and hovered in a wide range of 20,199.81 and 19,658.64 before finishing at 19,727.27, posting a loss of 536.44 points or 2.65 percent, over the last week's close.
The 30-share BSE barometer gained a healthy 1,744.27 points, or 9.42 percent, in the previous four weeks.
The NSE 50-share Nifty also dropped by 178.90 points, or 2.98 percent, to end at 5,833.20. The key index rose 540.35 points, or 9.88 percent, in the last four weeks.
The market ended lower even after receiving indications from RBI that it would take measures to provide adequate liquidity in the financial system and ease norms for providing swaps to banks borrowing funds from overseas.
Banking and realty stocks, which are sensitive to interest rates, declined along with refinery, PSU and capital goods shares.
Meanwhile, foreign institutional investors continued their buying spree, pumping in a net of Rs 603.95 crore during the week, including the provisional figure of September 27, as per the data issued by the stock exchanges.
Twenty out of the 30 Sensex shares ended lower, while the remaining finished with gains.
Among the major sectoral indices, S&P BSE-bankex fell 7.25 percent followed by realty at 7.13 percent, oil & gas at 4.44 percent, PSU at 2.49 percent, consumer goods at 1.64 percent and S&P BSE-FMCG dropped 1.39 percent.
Ignoring the negative trend, the S&P BSE-HC rose by 1.55 percent.
Among the Sensex pack, major losers were Jindal Steel at 9.20 percent, HDFC Bank at 7.48 percent, Maruti Suzuki at 6.70 percent, ICICI Bank 6.48 at percent, SBI at 6.00 percent, Bharti Airtel at 5.59 percent, ONGC at 5.46 percent, RIL at 4.80 percent, HUL at 4.67 percent, Tata Steel at 4.18 percent, Mah & Mah at 3.74 percent and L&T dipped 3.47 pct.
Major gainers were BHEL at 6.43 percent, Sun Pharma at 4.09 percent, Hero Moto at 3.20 percent and Dr Reddy's Lab shot up 2.18 percent.
Total turnover at BSE and NSE dropped to Rs 8,461.06 crore and Rs 55,135.00 crore, respectively from the last weekend's level of Rs 10,307.45 crore and Rs 66,173.74 crore.