The S&P BSE Realty index slipped 3.2 percent, followed by the S&P BSE Power index which was down 2.3 percent, and the S&P BSE Telecom index closed 1.95 percent lower.
The S&P BSE Sensex slipped over 200 points on Monday to close marginally above its crucial psychological support placed at 35,000 while the Nifty50 reversed gains after hitting a high of 10,770 to end above 10,600 levels.
A large part of the fall was led by banking pack which came under pressure on expectations of a rate hike in the June policy meeting. The outcome of the policy meeting will be announced on 6 June.
An RBI staff study showed every 100 bps increase in borrowing costs lowers the investment rate by as much as 91 bps.
A Reuters poll before the January-March growth data showed that 40 percent of nearly 60 respondents saw a rate hike on Wednesday, while nearly 70 percent of 44 projected that in August - a sharp contrast to an April survey seeing an increase only in 2019's second half.
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The anticipated increase could put a dent in growth, which has recovered after blows from the November 2016 demonetisation, the report added. The key concern of the central bank, which has long kept the repo rate at 6 percent, is the inflation rate, which is widely expected to climb further.
Nifty Bank lost 435 points or 1.63 percent to close at 26,257.55 weighed down by losses in Bank of Baroda, IDFC Bank, HDFC Bank, Federal Bank, SBI, Kotak Mahindra and ICICI Bank.
The S&P BSE Sensex closed 215.37 points lower at 35,011.89 while the Nifty5o ended 67.70 points down at 10,628.50.
On the sectoral front, the S&P BSE IT index rose 0.43 percent, followed by the S&P BSE metal index which gained 0.23 percent.
The S&P BSE Realty index slipped 3.2 percent, followed by the S&P BSE Power index which was down 2.3 percent, and the S&P BSE Telecom index closed 1.95 percent lower.
The S&P BSE Midcap index slipped 2 percent, while the S&P BSE Midcap index closed 0.82 percent down.
Top Sensex gainers include names like Dr Reddy’s Laboratories (up 2.8 percent), Infosys (up 1.5 percent), M&M (up 1.4 percent), Tata Steel (up 1.1 percent), and TCS (up 0.7 percent).
Top Sensex losers include names like HDFC Bank (down 2.9 percent), Bharti Airtel (down 2.8 percent), Adani Ports (down 2.4 percent), Power Grid (down 2.06 percent), and HUL (down 1.7 percent).
Stocks in news:
Dr Reddy's Laboratories share price rose 2.8 percent after Srikakulam plant cleared by the US health regulator. The pharma major informed exchanges that the audit of API Srikakulam Plant (SEZ), Andhra Pradesh by the US Food and Drug Administration has been completed.
Steel Authority of India’s shares rose 4.6 percent as investors cheered a ratings upgrade on the stock. Global research firm Citi has upgraded the stock from neutral from sell and raised the target price by 66 percent to Rs 83 from Rs 50.
HDFC Bank slipped 3 percent as trading for foreign investors for HDFC Bank shares opened on Friday. Macquarie Capital Securities (India) Pvt. Ltd said that foreign institutional investors (FIIs) are likely to buy more than $ 1 billion of the stock, said a report.
IDBI Bank: Government appointed Mahesh Kumar Jain, CEO of IDBI Bank Ltd, as deputy governor of the Reserve Bank of India for three years. IDBI Bank shares fell over 6 percent in intraday trade before closing at Rs 61.10, down 4.3 percent.
Deep Industries Ltd slumps as much as 19.98 percent to 107.15 rupees, its lowest since July 17, 2015 as the company has been brought under CBI radar. The Central Bureau of Investigation has booked 13 senior serving and retired officials of ONGC for alleged irregularities in giving a contract to Deep Industries for supplying gas dehyrdation units for its Rajahmundry plant in Andhra Pradesh.
In other news/Global Update:
The Indian rupee on Monday erased all the morning gains and was trading marginally lower against US dollar as traders turned cautious ahead of Reserve Bank of India’s bi-monthly policy outcome on 6 June, said a report.
European markets traded higher amid a slew of corporate news about potential mergers and acquisitions. France's CAC, Germany's DAX and Britain's FTSE gained 0.3-0.75 percent at the time of writing this article.
Asian markets rallied following positive lead from Wall Street after better-than-expected US jobs report. Hong Kong's Hang Seng and Japan's Nikkei climbed over a percent while China's Shanghai Composite and Australia's ASX 200 rose over half a percent.
Oil prices declined amid strong US production and likely increase in output from OPEC members. Brent crude futures fell 1.13 percent to $75.92 a barrel.