The BSE benchmark Sensex registered its sharpest decline in four weeks today, plummeting by nearly 197 points as edgy investors offloaded interest rate-sensitive stocks amid fears of an impending rate hike by the RBI.
The 30-share Sensex index of the Bombay Stock Exchange, which lost over 62 points in Tuesday's session, closed 197.62 points lower at 20,301.10 on Wednesday, recovering marginally from an intra-day low of 20,243.95.
In a similar fashion, the broad-based National Stock Exchange Nifty index fell by 66.55 points to 6,079.80 after dipping to a low of 6,062.35 during the course of trade.
The decline was led by banking, realty, auto and capital goods stocks over fears the Reserve Bank of India might raise interest rates to curb rising inflation, which could have the unwanted effect of slowing down economic growth and investment.
A weak trend in the rest of Asia and a lower opening in Europe this afternoon further influenced the market sentiment, according to market analysts.
In the 30-BSE index components, 24 stocks closed with losses, while six ended higher. The most valuable scrips on the Sensex, Reliance Industries and Infosys Technologies closed lower on emergence of profit-booking.
The banking sector index was the worst-hit by the uncertainty over the RBI's possible course of action. The index fell by 2.19% to 12,833.69 after HDFC Ltd, the biggest mortgage lender, fell by 2.75% to Rs 707.65, its lowest level in 11 months, after BNP Paribas downgraded its rating.
In addition, ICICI Bank, the second-largest private lender in the country, retreated for the third straight day, losing 3.085 to Rs 1,070.10.
The realty sector index was the second-worst performer, falling by 2.03% to 2,780.89, followed by the auto index, which lost 1.95% to 9,964.24.
Similarly, the capital goods index fell by 1.60% to 15,198.77. The metal index declined by 0.61% to 17,781.96 as Tata Steel shed 1.94% to Rs 681 and copper producer Sterlite Industries slid by 1.32% to Rs 190.80 as global metal price declined.
With the selling pressure spread over a broad front, the mid-cap index fell by 1.27% to 7,753.34 and the small-cap index by 1.02% to 9,740.38.