Investors deserted bank stocks and the rupee weakened against the dollar on Monday after the Reserve Bank of India (RBI) hiked rates last week despite the wide spread expectation that the Governor Raghuram Rajan would effect a reduction in order to boost growth.
The rupee closed at 62.60 per dollar after touching a low of 62.73 intra-day. The rupee closed at 62.23 on Friday. In the offshore non-deliverable forwards (NDF) the one-month contract was at 63.39 per dollar and the three-month was at 64.52.
The BSE 30-share sensitive index (Sensex) tanked by 362.75 points to close at 19900.96 as bank stocks, which are rate sensitive, tumbled by 4.41 per cent followed by realty (4.33per cent), capital goods (3.28 per cent), PSUs (2.56 per cent) and power (2.26 per cent).
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Except consumer durables, which gained 2.36 per cent, information technology (0.91 per cent), and technology (0.43 per cent), all other sectoral indices ended in the negative territory.
“Post RBI’s monetary policy review, the markets have become negative and profit booking continues unabated. Global markets also will remain jittery on account of U.S. debt ceiling related political confusion up to September 30,” said Sudip Bandyopadhyay, Managing Director and CEO, Destimoney Securities.
Domestic bond yields have also turned extremely volatile on the back of large Government borrowing programme. “This also has been putting pressure on Indian markets, Mr. Bandyopadhyay added.
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On the National Stock Exchange (NSE), the Nifty closed at 5889.75 with a loss of 122.35 points .
“Amid mixed global cues, domestic bourses remained under pressure on Monday and lost nearly two percent after a negative start. It seems that traders were readjusting their short-term positions after the recent developments and offloading stocks from interest rate sensitive sectors. The uneasiness is mainly due to the underperformance and present level volatility in these sectors,” said Jayant Manglik, President-Retail Distribution, Religare Securities.