Mumbai: The BSE benchmark Sensex snapped a five-week winning spree by tumbling 263 points to close at 18,675 during the current week on fresh selling following downgrade warning to India from a top global rating agency despite the government unleashing a wave of economic reforms to boost growth and revive investor sentiment.
Standard & Poor's (S&P) on Wednesday said there is a "one in three" change of a downgrade of the country's sovereign rating to junk status in the next two years.
The news came after International Monetary Fund (IMF) slashed the third-largest Asian economy's growth forecast for 2012 to 4.9 percent from 6.1 percent projected earlier, due to low business confidence and "sluggish structural reforms".
The market got a further jolt due to disheartening revenue and earnings guidance in rupee terms for the current fiscal given by IT bellwether Infosys in its quarterly results announced on Friday.
Infosys posted 24.3 percent jump in consolidated net profit at Rs 2,369 crore for Q2. The Bangalore-based software exporter lowered its revenue growth guidance for the current fiscal to 17.3 per cent from earlier target of 19.7 percent.
The Sensex resumed higher at 18,969.19, but declined afterwards to 18,581.49 before settling the week at 18,675.18, showing a loss of 263.28 points, or 1.39 percent, from its last weekend's level. The 30-share index had gained 1,508.90 points, or 8.65 percent, in the last five weeks.
The NSE 50-share Nifty dropped by 70.90 points, or 1.23 percent, to finish at 5,676.05. It had gained 488.45 points, or 9.28 percent, in the last five weeks.
The World Bank lowered its fiscal year economic growth forecast for India to 6 percent due to infrastructure problems and slow policy reform, and warned there is a high risk that growth could slow further if economic conditions in Europe deteriorate.
The rise in Index of Industrial Production (IIP) by 2.7 percent in August, reversing the contraction trend witnessed during the previous two months, and slight fall in retail inflation to 9.73 percent from 10.03 percent in the previous month failed to provide support to the market.
Market participants were not impressed with Finance Minister P Chidambaram's promise to take steps to deal with inflation, fast-track disinvestment and announce a roadmap for fiscal consolidation.
Meanwhile, Foreign Institutional Investors (FIIs) continued their buying spree, investing Rs 3,194.86 crore during the week, including the provisional figure of October 12.
"Infosys disappointed the Street which tanked despite good IIP number. This was inevitable as many FIIs were pre- determined to exit IT sector due to below expectation growth.
"Not only the IT sector, wherever the stock will not meet analyst expectations, they will receive the same hammering as valuations have reached the upper end for FY12-13. The reforms will not yield any results in the short-term," said Kishor Ostwal, CMD, CNI Research Ltd.
"Anyways, we had given a sell call at 5820 in Nifty and asked to cut short and go long at 5650. This range is very important as either side these have become support and resistance.
"Ever since the FM took charge sentiments have changed for better though nothing constructive has come to really address the fiscal deficit. We expect RATE CUT on 30th October which will take us past 6,000 in November as 30th October falls in next settlement. Monday RIL is set to announce their results post market, which will set the further tone of the market," he added.
Out of the 30-share Sensex pack, 22 stocks ended with losses while eight others finished with gains.
Major loser were BHEL (6.76 percent), Wipro (5.92 percent), Hindalco (5.76 percent), Infosys (5.23 percent), Reliance Ind (4.49 percent), SBI (3.79 percent), Tata Motors (3.49 percent),ONGC (3.44 percent), Gail India (3.31 percent) and Bharti Airel (2.08 percent).
However, Sun Pharma shot up by 4.53 percent followed by ITC 2.64 percent, Tata Steel 2.48 percent and HDFC Bank 1.35 percent.
Among the major indices the BSE-Realty dropped by 4.10 percent followed by the BSE-Oil&Gas 3.49 percent, the BSE-IT 3.08 percent, the BSE-Teck 2.92 percent, the BSE-Power 2.47 percent, the BSE-Auto 2.08 percent, the BSE-PSU 1.44 percentand the BSE-CG 1.44 percent.
The total market turnover at BSE and NSE moved down to Rs 12,086.76 crores and Rs 58,472.73 crores from the last weekend's level of Rs 13,145.51 crores and Rs 58,988.59 crores.