fall in headline inflation, as measured by Whole Price Index (WPI), to 7.25% in June from 7.55% in May 2012 and retail inflation to 10.02% in June from 10.36% in the previous month, food inflation rose to 10.81%, dashing hopes of a rate cut by Reserve Bank of India (RBI) later this month.
Selling was seen mainly in interest rate based counters like realty, auto and banking. Power, capital goods and PSU stocks also suffered a setback.
Stocks also dropped on Friday on reports the RBI plans to tighten norms for loan restructuring of corporates. Under the impact of a slowdown, several companies are knocking at the doors of banks seeking recast of their debt burden.
The 30-share Sensex resumed better at 17,241.98 and moved in a range of 17,318.93 and 17,038.59 before ending the week at 17,158.44, a loss of 55.26, or 0.32%. It has lost 362.68 points, or 2.07%, in the last two weeks.
The NSE 50-share Nifty also dropped by 22.15 points, or 0.42%, to end at 5,205.10. It has fallen by 111.85 points, or 2.10%, in the last two weeks.
Brokers said investors became cautious following differences between the Congress and Agriculture Minister Sharad Pawar-led NCP, a key UPA ally which has raised questions over functioning of the ruling coalition at the Centre.
The Sensex dropped by over 120 points on Friday on weakness in global stocks amid ongoing euro zone debt worries and weak US economic data.
Meanwhile, Foreign Institutional Investors (FIIs) continued their buying spree by injecting Rs. 3,031.36 crores into the equity markets during the week including provisional figure of July 20.
From the 30-share Sensex pack, 18 stocks ended in the red while 12 finished in the green. Shares of Maruti Suzuki, which tanked nearly 3.30% after its Manesar plant was shut down following a clash between management and employees.
Other major losers from the Sensex pack were Tata Motors (5.16%), NTPC (2.32%), Tata Steel (2.31%), M&M (2.28%), Gail India (2.17%), Dr Reddy's Lab (2.14%), TCS (2.13%) and SBI (2.02%).
However, Bajaj Auto shot up by 6.24% on good Q1 results followed by Bharti Airtel 2.10%, Sterlite Ind 1.55%, HDFC 1.33%, Sun Pharma 1.34%, Coal India 1.95% and Wipro 1.11%.
Among the sectoral indices the BSE-Realty dropped by 2.52% followed by BSE-Auto 1.59%, BSE-Power 1.56%, Bankex 1.15%, BSE-CG 1.12% and BSE-PSU 1.04%, while BSE-CD shot up by 2.53% and BSE-HC by 0.84%.
Small-cap and Mid-cap indices also declined by 0.92% and 1.02%, respectively due to sustained selling pressure from retail investors, under performing the Sensex.
The total turnover at BSE and NSE declined further to Rs. 9,534.90 crores and Rs. 43,284.09 crores respectively as against the last weekend's level of Rs. 10,033.94 crores and Rs. 47,242.95 crore.
Forex: In a see-saw trade, the rupee snapped its three-week gaining streak and fell marginally by 17 paise to settle the week at 55.32 against the dollar on some weakness in local stocks amid fresh dollar demand from importers. Firm dollar overseas as the eurozone debt crisis resurfaced also weighed on the rupee, while continued capital inflows restricted the fall in the rupee to certain extent, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed higher at 54.90 a dollar from last weekend's close of 55.15. It moved in a range of 54.76 and 55.55 before concluding the week at 55.32, a fall of 0.31%.
In last three-week of gaining streak, it had spurted by 200 paise or 3.50%.
Investors' hope of rate cut by the RBI were dashed as food inflation continued to rise in June to 10.81% from 10.74% in May.
The dollar index was also up after the US Fed did not commit to more monetary measures. US Federal Reserve Chairman Ben Bernanke's two-day testimony to the congress was a non-event as most of the his speech has already been delivered.
With the euro falling against the dollar on reports that Spain's Valencia region will seek help to repay loans, the sentiment in favour of rupee changed, traders said.
Sensex was down by over 55 points or 0.32% during the week. The dollar demand from importers, mainly oil refiners, to meet their month-end requirements also put pressure on the rupee.
However, Foreign Institutional Investors (FIIs) infused over USD 656 million in first four days of the week, taking a total to over USD 1.6 billion in the current calender year till July 19, capping the rupee fall.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd said, "The contraction in the trade deficit numbers along with the weakening of the WPI inflation numbers aided the INR for a firmer start but the double digit CPI numbers and the below normal average monsoon erased such gains." he added.
The RBI fixed the reference rate for US dollar and euro at Rs. 55.1515 and Rs. 67.6030 from Rs. 55.6560 and 67.8783 last weekend, respectively.
"We expect the INR to trade in the range of 54.00 - 56.50 levels in the current week," Brahmabhatt said.
The rupee premium for the forward dollar ended mixed on alternate bouts of buying and selling.
The benchmark 6-month forward dollar payable in December settled lower at 158-160 paise from last weekend's level of 161-163 paise, while far-forward contract maturing in June ended up at 304-306 paise from 302-304 paise last weekend.
The rupee reacted downwards against Pound Sterling to end the week at 86.79 from preceding weekend's close of 85.29 and also fell back against the euro to 67.57 from 67.23.
However, it dropped further against the Japanese yen to 70.42 per 100 yen from last weekend's level of 69.56.
Oil and oilseeds: Non-edible oils prices shot up, while in edible oils refined palmolein firmed up at the oils and oilseeds market, during the week under review.
Castorseeds bold and castoroil commercial prices continued to climb due to rising demand from shippers and soap industries on the back of reduced supplies from producing belt.
Castorseeds futures also rallied smartly on heavy speculative demand and persistent export enquiries.
Linseedoil prices surged on firm demand from paint and allied industries.
Groundnutoil traded in tight range to end stable amidst ample supply positions.
Refined palmolein recovered smartly to surge ahead on good retail demand supported by bullish Malaysian advices.
In the non-edible section, castorseeds bold resumed sharply higher at Rs. 3,675, but later moved down to Rs. 3,625 before recouping to close at Rs. 3,850 from last weekend's level of Rs. 3,525, a steep gain of Rs. 325 per 100 kg.
Castoroil commercial also opened higher at Rs. 765 later moved down to Rs. 755 before regaining to finish at Rs. 800 from its previous weekend's level of Rs. 680, registering a 0gain of Rs. 65 per 10 kg.