After advancing 160 points, the Sensex on Monday erased initial gains to close over 90 points down as the much-awaited RBI measures to stem rupee's slide did not match market expectations amid rupee plunging close to 58 level.
The BSE benchmark Sensex, which had climbed to a seven- week high of 17,132.15 during the day, lost momentum and touched a low of 16,853.05 after RBI hiked FII limit in government bonds to $20 billion while allowing up to $10 billion via overseas borrowings route by domestic corporates for refinancing their rupee loans.
The 30-share Sensex finally closed at 16,882.16, down 90.35 points or 0.53 per cent as 21 counters including Hero MotorCorp, Hindalco, ONGC, Cipla and State Bank of India fell.
"The government came out and announced measures to boost the economy. However, the market found them less than what was expected," said Milan Bavishi, Head Research, Inventure Growth & Securities.
Sectors like banking, auto, metal and realty stocks faced investor wrath even though index heavyweight Reliance Industries bucked the trend by closing up 0.72 per cent.
The rupee, which breached the 57-level on June 22, opened in the positive zone against the dollar but soon after the RBI measures were announced it sharply fell to 57.92 levels.
"We believe, the hike in government debt is welcome as it improves the inflows of dollar on a short-term basis. However, the rest of the other measures would require a longer time frame to play out," said Anindya Banerjee, Senior Manager, Currency Derivatives Research Desk, Kotak Securities.
The 50-share NSE index Nifty fell by 31.40 points, or 0.61 per cent to 5,114.65, after touching the day's high of 5,194.60.