Mumbai: The benchmark S&P BSE Sensex tanked a whopping 402 points to close at a two-week low of 19,748.19, breaking four weeks of uptrend, following disappointing Q1 results amid steps taken by the central bank to stem the rupee fall.
The Bombay Stock Exchange 30-share barometer, which logged its 30-month closing high of 20,302.13 on Tuesday came off from the highs and dipped to settle at 19,748.19, showing a fall of 401.66 points or 1.99 percent.
In last four-weeks, it had spurted by 1,375.61 points or 7.33 percent.
The wide-based CNX Nifty of the NSE also dipped by 143.00 points or 2.37 percent to end at 2-week low of 5,886.20.
Lower-than-expected first quarter results announced by construction and engineering giant, L&T weighed on the market.
While, it recovered on Tuesday as the markets gave a thumbs-up to the RBI's fresh curbs on gold imports and a drop in US home sales suggested the Fed would continue its stimulus programme.
The Reserve Bank of India's move on late Monday to curb gold imports to slash the current account deficit was one of the reasons that helped boost sentiment in the markets, brokers said. A shift in funds to domestic stocks from the bullion and forex markets also supported the market, they added.
However, the RBI took additional steps to tighten liquidity in a bid to curb exchange rate volatility, which dampened the market sentiment and a result banking stocks suffered heavy losses.
The RBI reduced the liquidity adjustment facility for each bank from 1 percent of net demand and time liabilities to 0.5 percent, limiting access to borrowed funds from the central bank. It also asked banks to maintain a higher average cash reserve ratio of 99 percent of the requirement on a daily basis as against 70 percent earlier.
"Markets sold off sharply after Tuesday on the back of fresh RBI measures," said Sanjeev Zarbade, Vice President - Private Client Group Research at Kotak Securities. "Due to these measures, banks having higher bulk borrowing would get impacted more as bond yields, CP and CD rates are likely to rise sharply. Even other sector stocks that are sensitive to interest rates witnessed selling pressure."
Besides cautious trades ahead of monthly expiry of derivatives on Thursday, brokers said a mixed trend in the global markets also affected local stocks.
Q1 results by FMCG giants ITC and HUL also later weighed on the market as sales numbers of ITC missed market estimates while HUL posted a 23 per cent drop in profit.
Brokers said investors refrained from creating major positions before the RBI's credit policy review scheduled on July 30. They also said the RBI's liquidity-tightening measures might hurt growth prospects in the short term.
After weak Q1 results from the L&T, other capital goods counters also suffered heavy losses as the S&P BSE-CG index was the top loser from the sectoral indices falling a massive 10.16 percent.
21 scrips out of the 30-share Sensex pack ended lower while 9 others finished higher.
The total turnover at BSE and NSE fell to Rs 9,390.41 crore and Rs 55,989.13 crore, respectively from the last weekend's level of Rs 9,411.92 crore and Rs 57,586.28 crore.
Meanwhile, foreign institutional investors (FIIs) were the net sellers.