Mumbai: After logging biggest weekly gain in 2013, the benchmark S&P BSE Sensex resumed its southward journey, tumbling 256 points during the week on fresh selling pressure amid cautious approach of investors ahead of the Reserve Bank of Indian (RBI) policy meet next week.
Banking shares, mainly of ICICI Bank, HDFC Bank and Axis Bank, crumbled at the tail-end of the week under heavy selling after a sting operation revealed these private lenders were allegedly involved in money laundering activities.
As the scandal unfolded, the banks in questions ordered internal probes even as the Government moved swiftly and said action will be taken if any person is found guilty in the alleged money laundering scam.
Other interest-rate sensitive stocks from realty and auto sectors also saw profit-booking on receding hopes of rate cut by the central bank in its March 19 monetary policy meeting due to rise in retail inflation despite a surge in industrial production data.
Besides BSE-CG index, which closed up 1.48 per cent, other 12 sectoral indices closed in the red between 0.02 per cent and 3.78 per cent with consumer durable, banking, auto, metal, IT, refinery and PSU suffering the most.
The market continued to reel under pressure after Morgan Stanley on Wednesday lowered India's GDP growth forecast for 2013-14 to six per cent from 6.2 per cent earlier, citing challenging domestic and external environment among other factors. HSBC has also cut its forecast by same margin.
The 30-share Sensex resumed weak at 19,679.88 and hovered in a wide range of 19,754.66 and 19,179.33 before settling at 19,427.56, posting a net loss 255.67 points, or 1.30 per cent. Last week, the index had soared 764.71 points or 4.04 per cent, registering biggest weekly gain in 2013 and snapping over month-long losing spree.
The NSE 50-share Nifty also plunged by 73.10 points, or 1.23 per cent, fall below 5900 mark and settle at 5,872.60.
Meanwhile, industrial production, as measured by the Index of Industrial Production (IIP), surged to 2.4 per cent in January from a contraction of 0.5 per cent (revised) in December 2012, while retail inflation (CPI) moved up for the fifth straight month to 10.91 per cent in February from 10.79 per cent in January.
Headline inflation based on the Wholesale Price Index rose marginally to 6.84 per cent in February from 6.62 per cent in January.
However, the core inflation declined below 4 per cent to nearly three-year low, keeping hopes alive that RBI would cut repo rate by 0.25 per cent on Tuesday, a broker said. "After a sharp rise last week, Indian markets were highly volatile this week. First the week saw IIP numbers, then the fall in core inflation and then money laundering scam.
These factors created high amount of volatility. In February, Nifty futures made a bottom of 5,672 and in March it made a high of 5,986 which was close to the psychological barrier of 6000," Kishor P Ostwal, CMX, CNI Research, said.
"However, the moot point is that only Nifty and Sensex stocks gained during this rally. Rest of the stocks are still lower than 5,672 levels suggesting weakness in mid-cap stocks.
Mid-cap pain will continue till the end of fiscal year and hence many mid-cap stocks may see carnage and hit lower circuits in the coming days," he added. Among the sectoral indices, the S&P BSE-CD fell.