The move by key UPA ally DMK to pull out of the Government rattled the market as the positive momentum created by RBI rate cut got lost in the din of political development, leading the CNX Nifty to tank by a hefty 89 points to close below 5,800 level on the NSE today.
The Reserve Bank cut repo rate by 25 bps for second time this year in a bid to revive economic growth, but it left the cash reserve ratio unchanged.
The rate cut was, however, overshadowed by political development in the form of DMK's decision to pull out of UPA Government, fuelling fears about instability at the Centre.
The apex bank also cautioned about risks on account of the current account deficit and higher inflationary pressure which limit possibility of further easing of rates.
Trading began on a positive note after overnight slide following low-level buying and better global cues ahead of the RBI policy meet.
But political developments at the Centre, which came close on heels of RBI policy announcement, triggered across the board selling with market players concerned over the fate of Government's recent burst of reforms.
Calm was partly restored after the Finance Minister said there was no threat to the Manmohan Singh Government though the statement was not enough to stem losses.
Financials, energy, auto, metal, infra and tech scrips witnessed heavy selling along with mid and small-cap stocks.
The 50-share Nifty tumbled to low of 5,724.30 before concluding at 5,745.95, a sharp fall of 89.30 points, or 1.53 per cent, from the last close. The index hit a high of 5,863.60 in the morning trade.
Amid frantic selling, Bhel plunged 5 per cent, Bharti Airtel 4.39 per cent, DLF 4.09 per cent, Reliance Infra 3.91 per cent, Sesa Goa 3.77 per cent, Jindal Steel 3.59 per cent, Cairn 3.45 per cent, ONGC 3.32 per cent, JP Associates 3.24 per cent and PNB 3.13 lost per cent.
The notable gainers included Gail, Bajaj Auto, Lupin, Ranbaxy, Sun Pharma, Maruti and ITC.
Turnover in the cash segment jumped to Rs 13,232.69 crore from Rs 8,588.77 crore yesterday. A total of 7,369.57 lakh shares changed hands in 59,35,793 trades. Total market capitalisation stood at Rs 63,48,858 crore.
