Sensex, Nifty close the week at 3 week low on RBI hawkish stance

Ignoring slash in key policy rates, both the Sensex and Nifty ended at a 3-week low after the Reserve Bank of India (RBI) projected a lower economic growth for current fiscal and concerned over the widening the twin deficit.

Ignoring slash in key policy rates, both the Sensex and Nifty ended at a 3-week low after the Reserve Bank of India (RBI) projected a lower economic growth for current fiscal and concerned over the widening the twin deficit.

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Contraction in the world's largest economy, US, for the fourth quarter announced by the US Commerce Department late Wednesday also weighed on the domestic markets.

RBI's draft guidelines on banking provisioning needs inspite of cutting lending rates and tepid earnings by some major corporates too later impacted negatively on the market.

RBI on Tuesday announced a cut in short-term lending rates, after nine months, and cash reserve ratio (CRR) by 0.25% respectively. The cut in CRR will infuse additional Rs. 18,000 crore in the banking system.

After a knee-jerk reaction to the cut in the lending rates, the Bombay Stock Exchange 30-share barometer initially logged a fresh over two-year high of 20,203.66.

Later, it succumbed with heavy selling as the rate cut was already discounted as per market participants. It got a further jolt when the RBI cut its GDP forecast to 5.5% for the current fiscal, from 5.8% projected earlier and also showed concern over the widening the fiscal as well as trade deficit.

The sensex later nosedived to end the week below 20,000 level at 19,781.19 on profit selling at existing higher levels mainly in capital goods, refinery, auto and tech stocks, a net fall of 322.34 points, or 1.60%.

The NSE 50-share Nifty also dropped by 75.75 points or 1.25% to close below 6K level at three-week low of 5,998.90.