Mumbai: The BSE benchmark Sensex snapped its four-week gaining streak and tumbled by 354 points to end at one month low of 17,429.56 due to fall in metal, realty, capital goods, auto and banking counters on the back of weak global cues.
The market continued to feel the heat of over week-long logjam in Parliament over the CAG report on coal block allocations, raising fears of delay in further reform process.
Statement on interest rates given by Reserve Bank Governor D Subbarao in US also affected the market sentiment.
He said, "The battle against inflation has not ended yet... It is still much above RBI's comfort level of 5-6 percent and to control it we need to keep interest rates high, but to support growth we need to keep interest rates low."
The 30-share index on Monday touched a high of 17,820.07, but then declined for the most of the week and touched a low of 17,337.61 before ending the week at 17,429.56, showing a net loss of 353.65, or 1.99 percent.
The index had gained 944.02 points, or 5.61 percent, during the last four weeks.
The NSE 50-share Nifty also dropped by 128.20 points, or 2.38 percent, to end at 5,258.50. It had gained 286.85 points, or 5.62 percent, in the last four weeks.
The global markets were also under selling pressure for most of the week ahead of the much-awaited speech from US Federal Reserve Chairman Ben Bernanke on August 31 at an annual gathering of Central bankers in Jackson Hole town in Wyoming as investors waited for the outcome of the summit.
According to experts, though seasonal rainfall trend has improved, crop sowing levels have remained lower due to below average monsoon that could have a "downside risk" to the economic growth forecast for the current fiscal, affecting summer crop outlook and food inflation. This, too, affected the market sentiment to some extent.
Metal stocks were at the receiving end on fall in metal prices on London Metal Exchange and weakness in Chinese economy. As a result, the sectoral BSE-Metal index was the top loser, slipping 7.05 percent.
Interest rates sensitive stocks from realty, auto and banking spaces also suffered heavy losses on no hopes of rate cut by the apex bank in the next monetary policy meeting on September 17 despite moderate fall in inflation, which was said to be still above the Central bank's comfort level.
Gross domestic product (GDP) edged up from nine-year low of 5.3 percent in January-March quarter to 5.5 percent in April-June period this fiscal, but it was sharply lower from 8 percent in the same period a year ago. The slowdown in GDP growth in Q1 FY13 also affected the market sentiment.
Meanwhile, Foreign Institutional Investors (FIIs) continued their buying spree during the week by investing Rs 3,502.42 crore in Indian stocks.
"On the first day of September settlement, the stock market corrected further and Nifty sinked to 5260. This was purely because shorts were rolled over and market movers did not roll longs even on the last day.
"This made them to built fresh positions at discount to the market and not at premium. Traders kept on shorting. Now on 13th Sept FED may meet again and on 17th Sept RBI will meet for policy decision. The buzz of rate cut will once again become stronger which will lead market to test new high," Kishor Ostwal, CMD, CNI Research Ltd, said.
Major losers were Jindal Steel (12.38 percent), Sterlite Ind (11.62 percent), Tata Steel (8.18 percent), Hero Motoco (7.36 percent), BHEL (7.27 percent), Hindalco Ind (6.49 percent) Bharti Airtel (6.26 percent), Reliance Ind (5.29 percent), Bajaj Auto (5.65 percent), Larsen (5.61 percent), Icici Bank (4.86 percent), Coal India (3.86 percent), ONGC (3.81 percent), Gail India (3.00 percent), Tata Motors (2.79 percent), Maruti (3.27 percent), SBI (2.63 percent).
However, Cipla rose by 6.57 percent followed by Wipro 3.94 percent, HUL 3.22 percent, TCS 1.84 percent, HDFC 2.98 percent and Tata Power 1.16 percent.
The total turnover at BSE and NSE rose to Rs 10,363.05 crore and Rs 52,068.03 crore, respectively, from the last weekend's level of Rs 7,886.40 crore and Rs 37,247.09 crore.