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Markets extended losses in late-morning session with 50-share Nifty inching below crucial support level of 6,000 on account of risk aversion.
Investors shunned riskier assets such as stocks after the Reserve Bank of India further tightened liquidity late on Tuesday evening.
RBI announced the overall limit for access to liquidity adjustment facility by each individual bank, would be capped at 0.5 per cent of its own net demand and time liabilities, outstanding as on the last Friday of the second preceding fortnight. This comes into effect from today and would remain in force until further notice.
Besides, RBI said that effective from the first day of the next reporting fortnight (July 27), banks would be required to maintain a minimum daily cash reserve ratio balance of 99 per cent of the requirement
Mirroring the concerns, 30-share Sensex slumped 270 points to trade at 20,031 while Nifty declined 105 points at 5,972.
Rupee, however, gained some respite and gained 33 paise to 59.43 at the Interbank Foreign Exchange market on fresh dollar selling by exporters after the RBI announced additional measures to arrest the local currency's slide.
Global risk appetite was frail after a private survey showed China’s manufacturing contracting at a faster-than-estimated pace..
In Asia, Japan’s Topix index lost 0.4 percent, while the Nikkei 225 Stock Average slipped 0.5 percent. Hong Kong’s Hang Seng Index dropped 0.2 percent and China’s Shanghai Composite declined 1.2 percent.
Domestically, among the sectoral indices, banks, realty, consumer durables, oil & gas and auto indices dropped while IT and pharma rose on the BSE.
The key gainers included counters such as TCS rising 1.4%, Sun Pharma gained 1.3%, Bharti Airtel rose 1.2% on the BSE.
The laggards were Sterlite Industries declining nearly 5%, Larsen & Toubro shed 4.2%, ICICI Bank and SBI declined 3.4% each while Mahindra & Mahindra was down over 3% on the BSE.
The key notable movers included counters such Coromandel International which has slipped over 6% to Rs 165 after reporting a sharp 82% year-on-year drop in its consolidated net profit at Rs 21 crore for the quarter ended June 30, 2013 (Q1) due to excessive inventory build-up and margin pressures. The fertiliser company had profit of Rs 115 crore in a year ago quarter.
Banking shares are under pressure on the bourses in early morning trades falling up to 8% after the Reserve Bank of India (RBI) has imposed some more measures to tighten liquidity to stabilize Indian rupee.
IndusInd Bank and Yes Bank were down by 8% each at Rs 426 and Rs 404 respectively, while Federal Bank and Axis Bank were slipped 5% each at Rs 362 and Rs 1,146 respectively on the Bombay Stock Exchange (BSE).
Broader markets traded weak with mid-caps and small-caps falling 1-1.7 per cent on the BSE.
The market breadth was negative. Out of 1,731 stocks traded so far, 1218 shares declined while 426 advanced on the BSE.
