Down 387 points to 16,353 as banking stocks fall on hardening monetary policy.
The Street saw a wave of selling following the hardening monetary policy stance adopted by the Reserve Bank in its quarterly review of credit policy.
The Sensex fell 2.3 per cent to its lowest close in six weeks, with banks leading the losses. The Sensex ended at 16,353, down 387.10 points, and the Nifty closed at 4,846.70, lower by 124 points.
Weak global markets and palpable nervousness ahead of the policy announcement came together to give the Indian markets a weak opening. The US markets had fallen overnight, as investors ditched home builders, and financials and commodity shares were weighed down by the strong dollar.
The Dow Jones dropped 104 points to 9,868 and the Nasdaq fell 12.62 points to 2,142.
The Asian markets caught the flu, with the Hang Seng plunging 348 points to 22,242 and the Nikkei slipping 152 points to 10,211 in morning trading. Domestic markets traded range-bound till the policy announcement and pressed the panic button thereafter.
The realty sector tanked 6.24 per cent as the regulator increased the provisioning norms for the real estate sector from 0.4 per cent to one per cent.
The BSE Bankex lost 3.82 per cent, with the central bank tightening the NPA (non-performing assets) rules and raising the statutory liquidity ratio for banks by 100 basis points to 25 per cent. More, it revised its end-year inflation estimate to 6.5 per cent from the earlier 5 per cent previously. And the metals space weakened by 5.82 per cent.
ICICI Bank plunged 6.1 per cent to Rs 836.25, State Bank of India gave up 4.45 per cent to Rs 2,202.95 and HDFC Bank lost 1 per cent to Rs 1,670.85 on the BSE. Unitech lost 7.71 per cent to Rs 85.60 and DLF weakened 6.4 per cent to Rs 401.70 on the NSE.
The central bank had, however, left the key rates unchanged. The cash reserve ratio remains at 5 per cent, while the repo and reverse repo rates have been left untouched at 4.75 per cent and 3.25 per cent, respectively.
The market breadth was extremely negative. Out of 2,789 shares traded on the BSE on Tuesday, there were 2,274 declining stocks and 449 advances.
Sanjay Sinha, Chief Executive Officer, DBS Cholamandalam Asset Management, said, “The credit policy merely acted as a trigger for the day's weakness. The correction was bound to happen, given the run-up in the past weeks and an impending end to the results season. The market is expected to consolidate in the next few weeks and await some major policy announcement on the domestic front or global market cues to take it further.”
