Mumbai: Snapping four days of gains, the BSE benchmark Sensex tumbled 240.10 points on Friday from record high to close at one-week low of 21,133.5 after RBI Governor Raghuram Rajan's comments on inflation dashed hopes of a rate cut in next week's monetary policy review.
A plunge in rupee value also hit investor sentiment. Traders also said weak global cues due to poor Chinese manufacturing data put pressure on markets.
The 30-share barometer resumed weak and was in the negative territory for the entire day.
The key index settled at 21,133.56, a fall of 240.10 points or 1.12 per cent, recording the biggest drop in more than three weeks.
On January 2, it declined 252 points. Jignesh Chaudhary, Head Of Research, Veracity Broking Services said: "Equity markets traded in the red on Friday after closing at an all time high on Thursday eroding maximum of their gains accumulated over the last four trading sessions."
In the previous 4 days, the bellwether index had gained 310 points to set new closing peaks on rate cut hopes after wholesale and retail inflation softened.
The barometer rose by 87 points to close at all-time high of 21,337.67 on Thursday.
Brokers said Rajan's comment that inflation was a "destructive disease" killed rate cut hopes.
Rupee weakness also added to worries of investors who pressed the selling button, they added.
BHEL at 3.39 per cent was the biggest Sensex loser, followed by Tata Steel at 3.26 per cent. Tata Motors was down 3.26 per cent and Sesa Sterlite 2.92 per cent. SBI, ICICI Bank and HDFC lost 2.12 per cent, 1.96 per cent and 1.31 per cent, respectively.
Martui Suzuki (1.25 per cent), Cipla (1.08 per cent) and Sun Pharma (1 per cent) were other big losers. All the 12 sectoral indices closed with losses in the range of 0.28 per cent and 3.19 per cent.
Interest rate sensitive realty, banking and auto ended lower by 3.19 per cent, banking 1.88 per cent and auto 1.57 per cent in that order.
The NSE 50-share Nifty dropped by 78.90 points or 1.24 pct to finish at 6,266.75.
"Inflation is a destructive disease. Industrialists complain about high interest rate but we don't have a choice but to keep interest at high rate because inflation is high at 8 per cent," Rajan had said in the 8th R N Kao Memorial Lecture organised by Research and Analysis Wing (RAW) in New Delhi on Thursday.
An RBI expert panel has also recommended that the central bank should start consumer price inflation target to determine the monetary policy.
The Reserve Bank of India's (RBI) monetary policy review is scheduled for January 28.
Pharma major Ranbaxy closed sharply down by 19.54 per cent on BSE after the USFDA prohibited the company from producing and distributing drugs for the American market from its Toansa plant in Punjab.
On global front, most Asian stocks ended in the red tracking overnight losses in the US.
Key benchmark indices in Hong Kong, Japan, South Korea and Singapore ended lower in the range of 0.36 per cent and 1.94 per cent, while indices in China and Taiwan moved up by 0.04 per cent to 0.60 cent.
European markets were also trading lower as key indices in France, Germany and UK eased by 0.23 per cent to 0.53 per cent.
The market breadth remained negative as 1,759 stocks ended in red, while 890 finished in green.
Meanwhile, foreign institutional investors (FIIs) bought net Rs 469.90 crores on Thursday, as per Sebi data.
Next: Rupee tanks 73 paise to two-month low of 62.66 against dollar
Rupee tanks 73 paise to two-month low of 62.66 against dollar
Mumbai: The Indian rupee crashed by 73 paisa to close at two-month low of 62.66 against the US currency on on strong dollar buying by banks and importers.
Forex dealers said weakness in local equities cast a shadow on the rupee. Dollar losing in overseas markets didn't impact the fall of the local currency, they added.
Dollar short-covering by some banks was triggered at 62.45-62.50 level pulling down rupee further at the fag-end.
"The month-end dollar demand, downbeat data from China and Fed’s tapering plan are all seen putting pressure on the rupee," said Abhishek Goenka, CEO of India Forex Advisors.
The Federal Open Market Committee, responsible for open market operations in the US, is meeting for two days on January 28 and January 29.
At the Interbank Foreign Exchange market, the local unit resumed lower at 62.12 a dollar from last close of 61.93.
It attempted a recovery at 62.07, but soon fell to a low of 62.73 before settling at 62.66, a fall of 73 paisa.
This is the biggest one-day fall in rupee since November 11, 2013 when it had tumbled by 77 paisa. The last time the rupee closed at Friday's level was on November 22, 2013, when it finished at 62.87.
Meanwhile, the benchmark BSE Sensex tumbled by 240.10 points or 1.12 per cent.
Foreign institutional investors injected USD 75.81 million on Thursday, as per Sebi data. The dollar index was down by 0.30 per cent against a basket of six major global rivals. Forward dollar premiums recovered on fresh payments from banks and corporates.
The benchmark six-month forward dollar premium payable in June rose to 213.5-215.5 paisa from 210-212 paisa previously.
Far forward contracts maturing in December shot up to 457-459 paisa from 447-449 paisa.
The RBI fixed the reference rate for the dollar at 62.17 and for the euro at 85.08.
The rupee slumped to 103.92 against the pound from last close of 102.81. It tumbled to 86.00 per euro from 84.44 previously. The local unit tanked to 61.41 per 100 Japanese yen from 59.37.
