The BSE benchmark Sensex plunged by 525 points to a 5-week low of 18,197.20 in the week under review on heavy selling pressure on fears of negative impact on corporate growth due to interest rate hike by the RBI amid maintaining hawkish stance on further monetary actions.
Global turmoil due to US debt tensions and weaker-than-expected US economic data too affected the market mood.
Traders as well as investors kept themselves away from making major purchases due to postponement of a vote in the House of Representatives on a US debt plan.
The Reserve Bank of India in its first quarter review of the monetary policy 2011-12, on July 26, hiked the short-term lending (repo) and borrowing rates (reverse repo) by 50 basis points to tame high inflation, making all personal and corporate loans more expensive.
The apex bank has also revised its fiscal-end inflation projection to 7% from 6% earlier.
Interest rate sensitive stocks from realty, banking and auto segments bore the brunt of heavy selling.
Offloading long positions in view of the expiry of July contract too aggravated the situation.
Metal stocks also were at the receiving end, following fall in metal prices at the London Metal Exchange (LME).
The BSE benchmark Sensex resumed slightly higher at 18,753.35 and hovered in a range of 18,944.60 and 18,131.86 before ending the week at 18,197.20, showing a loss of 525.10 points, or 2.80%, from its last weekend's level.
Investors feared the US debt-ceiling standoff could force a default or downgrade of US debt.
The NSE 50-share Nifty also dropped by 151.95 points, or 2.70%, to 5,482.00.
Among the major indices, the BSE-Realty dropped sharply 7.39%, the BSE-Capital Goods by 5.22%, the BSE-Metal by 5.05%, the BSE-Power by 4.44%, the BSE-Oil & Gas by 4.24%, the Bankex by 3.57% and the BSE-PSU by 3.02%.
The BSE Mid-Cap index fell by 130.81 points, or 1.86%, to 6,915.31. The BSE Small-Cap index also slid 157.91 points, or 1.87%, to 8,305.58.
From the 30-share Sensex pack 24 scrips declined while six scrips showed moderate gains.
Major losers from the Sensex pack were Jaiprakash Associate (11.42 pc), BHEL (6.82 pc), Reliance Infra (6.68 pc), Jindal Steel (6.53 pc), SBI (6.10 pc), Larsen (5.45 pc), Reliance Ind (5.24 pc), Sterlite Ind (5.12 pc), Tata Motors (4.96 pc), Cipla (4.81 pc), Hindalco Ind (4.75 pc) and DLF (4.03 pc).
However, Reliance Communications shot up by 8.55%, Bharti Airtel by 6.34%, Maruti by 3.94% and Bajaj Auto by 1.19%.
The total turnover at BSE and NSE was Rs 14,429.50 crore and Rs 62,897.84 crore, respectively, as against the last week's level of Rs 14,577.75 crore on the BSE and Rs 51,137.84 crore on the NSE.