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Foreign institutional investors (FIIs) sold shares worth Rs 885 crore on Tuesday, their highest single-day selling in over three months, dragging the benchmark indices down 1.5 percent each. These investors sold on Tuesday as the rupee's recent decline has reduced the possibility of the Reserve Bank of India cutting policy rates aggressively early next week.
The Sensex declined 298.07 points, or 1.53 per cent, to close at 19,143. The Nifty fell 89.20 points, or 1.52 per cent, to 5,788.80, closing below its 200-day moving average of 5,791.46 for the first time since April 15.
"The rupee's sudden depreciation has led to some outflows and correction in the equity markets," said Lalit Thakkar, managing director- Institution, Angel Broking.
The last time FIIs had sold to this extent on Tuesday was on February 28. So far in June, these investors have net bought shares of Rs 962.80 crore after pumping Rs 84,000 crore since January.
Investors will closely watch industrial production for April and consumer price inflation for May, set to be announced on Wednesday.
Lenders were hit hard by the rupee's fall. Striking 58.98 a dollar at its weakest, the rupee has dropped in 16 of the last 18 trading sessions and is down 8.3 per cent since the start of May. The currency is among the top-three worst-performing currencies in Asia this year.
ICICI Bank Ltd fell 3.7 percent, Axis Bank Ltd lost 2.4 percent and HDFC Bank Ltd ended 1.7 percent lower.
The three lenders were hit after the Reserve Bank of India imposed penalties on them on Monday for violating guidelines related to customer identity.
