The Reserve Bank of India's liquidity tightening measures triggered a sell-off in the banking space and rendered the mood on the Indian bourses quite bearish at the ring, and although stocks from information technology and healthcare sectors managed to find some support, the key indices Sensex and Nifty ended with notable losses on Wednesday.
As stocks went sliding down, the Sensex plunged beow the magical 20,000 mark to 19,994.25 a little past noon, and despite staging a recovery of sorts, ended the session with a sharp loss of 211.45 points or 1.04% at 20,090.68.
The Nifty, which declined to 5962.60, closed with a loss of 87.30 points or 1.44% at 5990.50. The Nifty's more pronounced loss was due to the presence of several bank stocks in its fold.
Bank stocks reeled under sustained selling pressure following the central bank's liquidity tightening measures. The Reserve Bank of India has reduced the liquidity adjustment facility for each bank from 1% of the total deposits to 0.5%, thus limiting the access to borrowed funds from the central bank. The central bank has also asked banks to maintain higher average CRR of 99% of the requirement on daily basis, as against the earlier 70%.
The BSE Bankex, which was down more than 6% at one stage, ended the day with a loss of around 4.6%. Sector heavyweights ICICI Bank (down 3.7%), State Bank of India (down 3.1%) and HDFC Bank (down 3.4%) declined sharply.
Yes Bank plunged more than 12%. IndusInd Bank, Canara Bank, Bank of India, Axis Bank, Federal Bank, Union Bank of India, Bank of Baroda, Punjab National Bank and Kotak Bank lost 3% - 9%. Several other bank stocks, which are not part of the Bankex, also ended with sharp losses.
Capital goods stocks Larsen & Toubro, Crompton Greaves, Jindal Saw, Siemens and Suzlon Energy lost 2% - 4%. ABB, Bharat Electronics, BHEL, Fag Bearings, Punj Lloyd, Thermax and Welcorp also declined sharply.
Metal stocks tumbled on weak manufacturing data from China. Hindalco, Hindustan Zinc, Jindal Steel & Power, JSW Steel, SAIL, Sesa Goa, Sterlite Industries and Tata Steel lost 1.8% - 4.2%.
Among the stocks in the Realty index, Godrej Properties, Indiabulls Real Estate, Anant Raj, Sobha Developers, Unitech and HDIL closed notably lower. Oberoi Realty bucked the trend and ended sharply higher and DLF edged up marginally.
In the automobile space, Mahindra & Mahindra and Maruti Suzuki lost 2.9% and 2.3%, respectively. Hero Motocorp declined by about 1.5% amid cautious trades ahead of results. Tata Motors closed with a modest loss, while Bajaj Auto moved up 1.6%.
HDFC closed nearly 3% down. Tata Power lost around 2%. NTPC, Hindustan Unilever, ONGC, GAIL India and Dr Reddy's Laboratories also closed weak. Reliance Industries ended almost unchanged.
HDFC ended lower by about 9%. Jaiprakash Associates lost over 6%. Ambuja Cements, Reliance Infrastructure, Ranbaxy Laboratories, ACC and BPCL declined by 1% - 4%.
Bharti Airtel, Wipro, Tata Consultancy Services, Sun Pharmaceutical Industries and Cipla gained 1.7% - 2.3%. Asian Paints gained 1.4%. Infosys, ITC and Coal India edged up marginally.
KPIT Cummins, Coromandel International and United Phosphorus declined on weak results. Dabur India edged higher after the company reported a 25% surge in net profit for the quarter ended 30 June 2013.
The market breadth was weak. Out of 2420 stocks traded on BSE, 1524 stocks declined. 773 stocks moved up and 123 stocks ended flat.