In spite of last day recovery on hopes of rate cut from Reserve Bank of India, both the key indices, S&P BSE benchmark S&P Sensex and Nifty ended in the red by over one% for the second consecutive week on persistent selling pressure following fall in the rupee value to an all-time low.
Fresh capital outflows also affected the market sentiment as Foreign Institutional Investors (FIIs) sold shares worth Rs. 2,515.68 crore during the week, including the provisional figure of June 14.
Shares of Consumer Durable, Metal, Realty, Power and PSU sectors declined sharply on selling pressure from operators.
The benchmark S&P BSE Sensex resumed higher at 19,530.35 and moved up further to 19,585.75 on select buying mainly in IT sectors in view of depreciation of rupee value to lifetime low of 58.98 against the dollar.
However, it later turned negative and dropped to a low of 18,765.53 on profit-booking before recovering on the last day to end the week at 19,177.93, still showing a loss of 251.30 points or 1.29%. It has lost 582.37 points or 2.95% in the last two weeks.
The NSE 50-share Nifty also dropped by 72.60 points or 1.23% to finish at 5,808.40.
Markets recovered at the end of the week due to fag-end buying on expectation of rate cut from RBI in view of fall in inflation after WPI inflation fell to over three-and-half-year low to 4.7% in May.
Finance Minister P Chidambaram's comment that government would announce steps soon to boost investment and growth also supported the market during the fag end of the week.
Lower inflation on account of declining prices of manufactured items and recent weak IIP data boosted hopes of monetary action by RBI on June 17, traders said.
The retail inflation (CPI) declined to 9.31% in May from 9.39% in April while industrial output growth (IIP) slowed down to two% in April this year from the revised 3.4% in last month.
"Rupee's sudden depreciation has led to some outflows and correction in the equity markets as well," said Lalit Thakkar, MD -Institution, Angel Broking.
20 shares out of the 30-share Sensex pack ended lower while 10 shares finished with gains.
Major losers from the Sensex pack were Jindal Steel (13.21%), Tata Power (8.68%), BHEL (7.06%), Sterlite Ind (6.85%), Tata Steel (6.11%), Coal India (5.92%), Sun Pharma (5.90%), TCS (4.78%), Hero Honda (2.66%), ONGC (2.52%) and M&M (2.03%).
However, Reliance Ind rose by 3.75% followed by Larsen 1.94%, Hindalco 1.77%, Cipla 1.41% and NTPC 2.03%.
Among the major indices, S&P BSE-CD dropped by 10.72% followed by S&P BSE-Metal 5.47%, S&P BSE-Realty 4.83%, S&P BSE-Power 3.54%, S&P BSE-PSU 3.21%, S&P BSE-Bankex 2.58% and the S&P BSE-IT 2.37%.
S&P BSE-Small-cap and S&P BSE-Mid-cap indices also declined by 3.18% and 3.24% on selling pressure from retail investors.
The total turnover at BSE and NSE rose to Rs. 9,845.95 crore and Rs. 51,080.54 crore, respectively from the last weekend's level of Rs. 8,946.16 crore and Rs. 46,744.48 crore.
The Indian rupee came off from its life-time low of 58.98 registered on Tuesday, but continued to rule weak for the sixth consecutive week, closing down by 45 paise at 57.51 against the Greenback on weak local equities and dollar demand from importers and some banks.
Fresh capital outflows also weighed on the rupee.
The rupee resumed the week lower at 57.18 from last weekend's close of 57.06 and tanked by 109 paise on Monday, registering its biggest loss since September 22, 2011 when it had tumbled by 124 paise, or 2.57%.
Later, it continued to reel under pressure and logged an all-time low of 58.98 on Tuesday on weak economic fundamentals, costlier imports, inflation risks rise and record high current account deficit (CAD).
But, the intervention of the apex bank in the forex market at the rupee's lowest level to stem the slide later helped the rupee to bounce back to settle the week at 57.51, still showing a fall of 45 paise or 0.79%.
In the last six weeks, it had plunged by 357 paise or 6.62%.
The benchmark S&P BSE Sensex dipped by 251.30 points or 1.29% while FIIs pulled out Rs. 2,515.68 crore during the week, including provisional figure of June 14.
"RBI was possibly waiting to enter the scene at levels where importers step out and exporters step in. It did so on Tuesday at around 58.9 levels. While the risk of rupee going to 60-levels is diluted, more is needed to bring it back to 57-levels," said Moses Harding, Head - ALCO and Economic & Market Research, IndusInd Bank.
The rupee has weakened from 53.8 levels in April-end to over 58-levels at present and is also among the worst performing emerging market currencies in the 2013 so far.
"This is a temporary phase. This is simply a correction. Our indication is some of the FIIs are now poised to bring in large funds. In next 3-4 days, we will see a mid-course correction," Department of Economic Affairs Secretary Arvind Mayaram said in New Delhi.
Chief Economic Advisor Raghuram Rajan said Finance Ministry will recommend to the Cabinet, policies to enhance FDI limits on number of areas. All this will help not just in short-term objective of financing the CAD safely but also in the longer term objective of ensuring sustainable growth.
Selling by FIIs last week in debt securities also put pressure on the rupee, said experts.
The rupee also got support after the rating agency Fitch revised India's credit outlook to stable from negative and government officials soothed market sentiment with assurance of taking steps to curb the currency's fall.
Mr. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt. Ltd. said, "Rupee traded volatile this week, in the first session of the week.
It traded weak against the dollar and crossed all time low of 57.32 to make a new low of 58.98 taking cues from weak domestic fundamentals, record current account deficit, high inflation and debt outflows.
Also, the Index of Industrial Production (IIP) data for April was out at 2%; lower than the 2.7% that the market was expecting whereas the Consumer Price Index-based inflation for May came in at 9.31% which was above the estimates.
"In the second session, rupee traded strong and tried to recover from the fall, taking cues from the strong local equities at the fag end of the week as the inflation data was out and reading was the lowest in more than three years.
The trading range for the Spot USD/INR pair is expected to be within 57.00 to 58.00," he added.
The premium for the forward dollar dropped further on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in November ended lower at 148-150 paise as against the last weekend's level of 155-157 paise and far-forward contracts maturing in May also dipped to 298-300 paise from 309-311 paise.
The RBI fixed the reference rate for the US dollar at 57.7410 and for the euro at 77.0225 from previous weekend's level of 56.7445 and 75.2033, respectively.
The Rupee slumped against the pound sterling to 89.97 from preceding weekend's close of 88.90 and also declined sharply against the euro to 76.59 from 75.66.
It too tumbled against the Japanese yen to 60.59 per 100 yen from last weekend's close of 59.67.
Gold maintained its strong rallying momentum and climbed to fresh multi-month high driven by persistent heavy demand from stockists as well as jewellery buying, extending its rise to a fourth straight week.
A sharp dip in rupee valuation amid bullish global sentiment further fuelled the buying frenzy.
But spiral of profit taking by speculators and investors at existing levels reduced some of its earlier gains.
Meanwhile, government ruled out any further hike in customs duty following a declining trend in gold imports in the last few weeks after the recent policy measures jointly taken by the centre and the RBI to curb gold demand.
The industrial metal, silver overcoming initial volatility recovered sharply towards the fag-end on the back of frantic speculative buy-out coupled with industrial offtake.
Globally, the shiny metal gained marginally after fluctuating heavily on mixed US macro-economic data and uncertainty over the fate of Federal Reserve stimulus measures against the backdrop of Bank of Japan (BoJ) decision earlier this week to leave monetary policy unchanged.
In New York, gold for August delivery moved up to USD 1,387.60 an ounce from 1,383 last weekend.
Silver for July contract edged higher to USD 21.95 an ounce as compared to USD 21.74 previously.
Standard gold (99.5 purity) resumed higher at Rs. 27,650 and surged to hit a high of Rs. 28,170 before ending at Rs. 27,905 from preceding weekend's level of 27,530, exhibiting a rise of Rs. 375, or 1.36% per 10 grams.
Pure gold (99.9 purity) commenced better at Rs. 27,775 and rallied further to a high of Rs. 28,290 before concluding at Rs. 28,050 from its last weekend's level of Rs. 27,675, revealing a gain of Rs. 375, or 1.36% per 10 grams.
Silver ready (.999 fineness) opened marginally lower at Rs. 44,190, but later recovered smartly to Rs. 45,400 before finishing at Rs. 44,975 from previous weekend's level of Rs. 44,200, registering a hefty gain of Rs. 775, or 1.75% per kg.