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Sensex Retreats From 2-1/2 Year Closing High; RBI Policy Key
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The BSE Sensex fell 1 per cent on 24 July' 2013, retreating from its highest close in 2-1/2 years in the previous session, as lenders slumped after the Reserve Bank of India (RBI) further tightened cash conditions to shore up the rupee.
The BSE's sub-index of banking stocks has slumped 9.2 per cent since the RBI first moved to squeeze liquidity on July 15, compared to a rise of 0.3 per cent in the benchmark index over the same period.
The RBI took new steps on Tuesday to support the rupee, including lowering the overall limit for borrowing under the daily liquidity adjustment facility.
Analysts worry that the failure to stabilise the rupee could lead the central bank to announce stronger measures such as an increase in the cash reserve ratio or even an outright hike in the policy rate.
"Markets sold off sharply on the back of fresh RBI measures.
In the next few days, focus would be on the RBI monetary policy meeting," said Sanjeev Zarbade, vice president of private client group research at Kotak Securities.
The BSE Sensex fell 1.04 per cent, or 211.45 points, to end at 20,090.68, snapping five consecutive sessions of gains. The index had closed at its highest since January 4, 2011 on Tuesday.
The Nifty fell 1.44 per cent, or 87.30 points, to end at 5,990.50, marking its biggest daily fall since July 3.
Lenders dependent on wholesale short-term funding fell the most following the RBI's new liquidity steps.
IndusInd Bank Ltd fell 8.5 per cent, while Yes Bank Ltd slumped 12.6 per cent and Axis Bank Ltd declined 6.5 per cent.
Shares in state-owned banks also fell as a drop in bond prices sparked concerns about losses in their debt holdings.
State Bank of India fell 3.2 per cent, while Punjab National Bank lost 4.5 per cent and Canara Bank ended 8.5 per cent lower.
IDFC Ltd slumped 8.6 per cent, hit as well after Morgan Stanley downgraded it to "underweight" from "equal-weight" cutting its loan growth outlook and citing an increase of 125 basis points in three-month commercial papers, which would make its funding more expensive.
Hero MotoCorp Ltd fell 2 per cent ahead of its June-quarter results later in the day.
Jaiprakash Associates Ltd fell 5.8 per cent after Deutsche Bank downgraded the stock to "sell" from "hold", citing higher-than-expected debt and calling the company "maybe the most expensive cement stock.
SpiceJet Ltd fell 3.5 per cent after media reports said Chief Executive Neil Mills has resigned more than a year before his contract was due to end.
Mills, who joined SpiceJet as CEO in 2010, did not answer phone calls. SpiceJet declined to comment.
Macquarie downgraded shares in drug maker Wockhardt Ltd on concerns that an import ban imposed by the United States over quality issues would last longer than expected, sending the stock down 20 per cent.
Wockhardt did not immediately comment about the downgrade. In a statement to the stock exchange on Saturday, the company said it had initiated "several corrective actions" to resolve the concerns raised by the FDA.
However, among stocks that gained, Dabur India Ltd rose 2.6 per cent after it said June-quarter profit rose 25 per cent to 1.86 billion rupees.