The BSE benchmark Sensex today plunged below 19,000 level but just managed to close at 19,008.10, still down by a hefty 285 points, on across-the- board selling sparked by DMK's withdrawal of support to UPA government that overshadowed RBI's rate cut.
Experts said markets reacted cautiously to RBI's rate cut as the sentiment was hit by Reserve Bank's statement that scope for future rate cuts is limited.
They said the Sensex was dragged down by telecom major Bharti Airtel which nosedived 4.74 per cent-- day's second biggest loser-- after a Delhi court summoned its Chairman Sunil Bharti Mittal in additional spectrum allocation case.
Markets were panic-stricken after the DMK withdrew support to Congress-led UPA government and pulled out its five central minister over the issue of alleged human rights violations of Tamils in Sri Lanka.
In knee-jerk reactions, the Sensex at one point plummeted 300 points to trade below 19,000 level.
Markets tried to stage a recovery after Finance Minister P Chidambaram's remark that government enjoyed majority and it was "absolutely stable". But weak European cues did not aid the recovery and the sentiment remained gloomy.
The Sensex finally ended the day at 285.10 points lower at 19,008.10, a level last seen on March 5. The index has lost 562.34 points in straight three sessions of losing string.
The NSE index Nifty shuttled between 5,863.60 and 5,724.30 before ending lower by 89.30 points to 5,745.95.
"The credit policy announced by RBI was overshadowed by DMK Chief Karunanidhi's statement withdrawing support to the UPA government," said Rakesh Goyal of Bonanza Portfolio.
RBI cut key policy rate by 0.25 per cent to 7.5 per cent but kept the CRR unchanged at 4 per cent. Governor D Subbarao, however, said "...Even as the policy stance emphasises addressing the growth risks, the headroom for further monetary easing remains quite limited."
RBI Governor's comments on inflation, investment slowdown and current account slowdown, indicates that sharp rate cuts in future are unlikely, Goyal said.
