Mumbai: Ignoring slash in key policy rates, both the Sensex and Nifty ended at a 3-week low after the Reserve Bank of India (RBI) projected a lower economic growth for current fiscal and concerned over the widening the twin deficit.
Contraction in the world's largest economy, US, for the fourth quarter announced by the US Commerce Department late Wednesday also weighed on the domestic markets.
RBI's draft guidelines on banking provisioning needs inspite of cutting lending rates and tepid earnings by some major corporates too later impacted negatively on the market.
RBI Tuesday announced a cut in short-term lending rates, after nine months, and cash reserve ratio (CRR) by 0.25 percent respectively. The cut in CRR will infuse additional Rs 18,000 crore in the banking system.
After a knee-jerk reaction to the cut in the lending rates, the Bombay Stock Exchange 30-share barometer initially logged a fresh over two-year high of 20,203.66.
Later, it succumbed with heavy selling as the rate cut was already discounted as per market participants. It got a further jolt when the RBI cut its GDP forecast to 5.5 percent for the current fiscal, from 5.8 percent projected earlier and also showed concern over the widening the fiscal as well as trade deficit.
The sensex later nosedived to end the week below 20,000 level at 19,781.19 on profit selling at existing higher levels mainly in capital goods, refinery, auto and tech stocks, a net fall of 322.34 points, or 1.60 percent.
The NSE 50-share Nifty also dropped by 75.75 points or 1.25 percent to close below 6K level at three-week low of 5,998.90.
According to RBI draft norms, banks would need to step up provisioning on restructured loans to 5 percent by FY'15 on the existing stock of restructured loans.
"Many government banks (ex-SBI) to be more impacted," said Rajeev Varma, Research Analyst, DSP Merrill Lynch India, in a report.
Brokers said the sentiment was also dampened after some investors trimmed their positions ahead of derivatives expiry on January 31.
The HSBC India Manufacturing Purchasing Managers' Index (PMI) -a measure of factory production- stood lower at 53.2 in January, after hitting a six month high level of 54.7 in December, which also affected the market sentiment.
The heavyweight and petro-chem giant, Reliance Industries (RIL), fell 2.02 percent after the first meeting of the newly formed Cabinet Committee on Investment failed to break the logjam over defence clearances to oil and gas activities in 39 offshore areas, including company's producing KG-D6 fields.
"Markets ended down on the last day of the week on weak global cues and uninspiring results. Bharti Airtel and BHEL reported Q3 numbers which were below expectations. Also, banking stocks fell," said Dipen Shah, Head PCG Research, Kotak Securities.
Major losers from the sensex pack were Bharti Airtel (8.09 percent), Tata Motors (5.33 percent), Larsen (4.50 percent), SBI (4.11 per cent), Jindal Steel (3.98 percent), HDFC Bank (3.66 percent), HDFC (3.29 percent), Tata Power (3.34 percent), Gail (3.03 percent), Hindalco Ind (2.53 percent), ONGC (2.51 percent) and HUL (2.14 percent).
However, Coal India rose by 4.26 percent followed by Cipla 3.89 percent, ITC 3.24 percent and Hero Motoco 2.80 percent.
Among the sectoral indices, the BSE-Capital Goods fell by 2.94 percent, BSE-Oil&Gas 1.69 percent, BSE-Auto 1.67 percent, BSE-Teck 1.62 percent and BSE-Power 1.29 percent while the BSE-CD rose by 2.20 percent, BSE-FMCG by 1.68 percent, BSE-Realty by 1.33 percent and BSE-HC by 1.10 percent.
Foreign Institutional Investors (FIIs) continued their buying spree by investing net Rs 4,871.08 crores during the week, including the provisional figure of February 1st.
The total turnover at BSE and NSE was Rs 11,457.89 crore and Rs 66,110.11 crore respectively as against the last weekend's level of Rs 12,199.84 crore and Rs 64,650.12 crore.