The Bombay Stock Exchange benchmark fell below the 16,000 level by nose-diving over 320 points, minutes after the Reserve Bank announced a hike in the mandatory cash reserve of banks held by the apex bank.
In a highly volatile trade, the 30-share index recovered some of the losses but remained under severe pressure. The barometer was down over 200 points at 16,102.91 at 12.30 hrs.
The 50-share Nifty, of the National Stock Exchange dipped by 2 per cent to 4,766 points.
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Brokers said markets plunged as the CRR hike was more than the expected 50-basis point increase. Metal and IT stocks were the hardest hit and their sectoral indices lost in the range of 2-3 per cent.
“The CRR hike was more than market expectation triggering nervousness in market. And bouts of volatility are likely to continue in the run up to the Budget. But the correction will provide opportunity for investors waiting in the sidelines to enter the market,” SMC Capitals Equity Head Jagannadham Thunuguntla said.
Major index losers were Sterlite (3.66 per cent), Tata Steel (3.90 per cent), Infosys (2.50 per cent), Wipro (4.90 per cent) and TCS (3.20 per cent).
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The BSE banking index was down 0.72 per cent at 9,306.03 points.
The Reserve Bank today raised the cash reserve ratio by 75 basis points to 5.75 per cent, but kept the short-term lending and borrowing rates unchanged.