Investors gave a thumbs-down to RBI's fresh measures to stem the rupee slide as Sensex on Monday erased the initial 158-point gain and closed 90 points down as the widely-anticipated steps did not match market expectations amid the currency plunging close to 58 levels.
The BSE benchmark Sensex had climbed to a seven-week high of 17,132.15 during the day as global agency Moody's retained outlook on India's rating at "stable" despite slowdown in GDP growth rate.
However, the markets lost momentum and Sensex touched a low of 16,853.05 after RBI hiked FII limit in government bonds to $ 20 billion while allowing up to $ 10 billion via overseas borrowings route by domestic corporates for refinancing their rupee loans.
The steps are expected to curb rupee's fall, which has lost over 26 % in last one year.
The 30-share Sensex closed at 16,882.16, down 90.35 points or 0.53 % as 21 counters including Hero MotorCorp, Hindalco, ONGC, Cipla and State Bank of India fell in the 2-3 % range. Investors wealth across the market dropped by over Rs 26,000 crore as 1,420 stocks fell while 1,334 rose.
"The way the FM had made comments on projected announcements, the market had built up huge expectations such as rate cut and amnesty scheme. ECB limits and FII investments never help for immediate cure...this disappointed the street," said Kishor P Ostwal, CMD, CNI Research.
Sectors like banking, auto, metal and realty stocks faced investor wrath even though index heavyweight Reliance bucked the trend by closing up 0.72 %.
The rupee, which breached the 57-level on June 22, opened in the positive zone against the dollar but soon after RBI measures were announced, it sharply fell to 57.92. However, it recouped some losses and was last trading at 57.10.
"The RBI steps is considered not as significant enough to help India Inc from taking benefits of the foreign money and also to arrest rupee fall," said DK Aggarwal, CMD, SMC Investments and Advisors.
Similarly, the 50-share NSE index Nifty fell by 31.40 points, or 0.61 % to 5,114.65.