Mumbai, June 18: Stocks tumbled, the rupee floundered and the bond yields leapt as the markets clawed values out of tradeable instruments and pounded the currency in frustration over the RBI's decision to stand firm on rates.
With the central bank deciding not to cut benchmark interest rates, the Sensex plunged 244 points, while the rupee closed at a two-week low of Rs 55.93 against the dollar.
Elsewhere, yields on 10-year government securities rose nearly 9 basis points to 8.43 per cent.
Government bond yields move in opposite direction to their prices.
The markets had been counting on a 25-basis-point cut in the repo rate to act like a magic potion that would revive a flagging economy.
However, the RBI chose not to cut the policy rates, which killed off any possibility of a domino effect on lending rates in the financial system. By reigniting concerns over inflation, many felt that the RBI was also squelching any chance of a rate cut in the immediate future.
The stock markets were the worst-hit. Investors were gung-ho in the morning because of the reassuring news that pro-reform parties would form the government in Greece after the elections held there on Sunday, which helped the Sensex to open above the 17000 mark. It allayed fears that Greece would be the first nation to leave the Eurozone.
Buoyed by hopes that the central bank would announce its second rate cut this year, the Sensex hit an intra-day high of 17109.95, a gain of 159 points. However, equities began to quickly lose their gains after 11am when details of the mid-quarter review came. With no policy rate cuts, the index slumped to a day's low of 16636.09, before ending at 16705.83, a drop of 244 points.
Market circles said the fall would have been higher if news had filtered into the market during trading hours that Fitch had also lowered its outlook on India's credit rating to negative from stable. "It could have an impact tomorrow," said one analyst.
While investor wealth was eroded by Rs 75,000 crore, banks, realty and auto stocks bore the brunt. Even as 28 counters in the 30-share Sensex closed with losses, the BSE Bankex and realty indices were the biggest losers in percentage terms.
"From the market's perspective, this (the monetary policy) is disappointing and it will now have to wait for government action (which has been delayed) and the monsoon progress to see any sustained uptrend. Any liquidity infusion globally, may also support markets," said Dipen Shah, head of fundamental research at Kotak Securities.
The rupee also tumbled under pressure and slid below the 56-mark to an intra-day low of 56.04, before gaining some ground to close at Rs 55.93, a fall of nearly 1 per cent, or 53 paise.