Sensex, Nifty shed over 1% as further rate cut hopes wither

Triggered by grim monsoon estimates by the India Meteorological Department (IMD), the domestic equity market extended its losses and fell further by 1.2 per cent on Wednesday.

While the BSE Sensex tanked 351.18 points to 26,837.20, the NSE Nifty fell 101.35 points to 8,135.10.

Overall market breadth remained weak on the BSE as 601 stocks ended with gains while 2,119 closed with losses. Advances to decline ratio for Nifty remained at 12:38.

"The RBI's rate cut of just 25 basis points against market expectations of 50 basis points along with poor monsoon estimates by IMD kept the domestic stock markets volatile on Wednesday as well," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.

Jayant Manglik, president-retail distribution, Religare Securities, said, "The sentiments were dampened as the country's services sector activity contracted for the first time in 13 months in May, largely due to decline in new order flows amid competitive pressure. Also, overhang of RBI's cautious stance in monetary policy and latest IMD report on monsoon was clearly visible."

Among the Sensex stocks, Coal India, Bharti Airtel, Infosys, TCS and NTPC were the top performing stocks with gains of 0.81 per cent, 0.79 per cent, 0.71 per cent, 0.40 per cent and 0.22 per cent, respectively.

However, Tata Power, ITC, ONGC, Vedanta and Gail plunged 6.13 per cent, 4.59 per cent, 3.81 per cent, 3.67 per cent and 3.44 per cent, respectively, and stood at the bottom of the performance chart of the index.

Barring the BSE IT index (up 0.16 per cent), all other indices on the Bombay Stock Exchange closed in red.

The BSE Realty index tumbled the most - 5.54 per cent to 1,419.24. It was followed by BSE FMCG index (down 3.45 per cent to 7439.20), BSE Power index (down 2.22 per cent to 2005.34) and BSE Oil & Gas index (down 2.05 per cent to 9,417.14).

Market experts believe realty stock tanked because the Reserve Bank of India hinted on Tuesday that there may not be any more interest rate cuts in the near-term. Shares of Unitech and Indiabulls Real Estate plunged the most - 35.27 per cent and 8.08 per cent to Rs 8.70 and Rs 50.65, respectively.

Nestle India continued to remain under pressure and corrected further by 9.05 per cent to Rs 6,191.10 on Wednesday amid ongoing probe against the company with respect to composition of its product Maggi. During the day, it touched a high of Rs 6,533 and low of Rs 6,000. The government has banned Maggi in Delhi for 15 days.

Asian peer markets Nikkei 225 and Shanghai were down by 0.34 per cent and 0.01 per cent respectively while Hang Seng was up by 0.69 per cent in the day.