Mumbai: The Sensex on Friday tumbled 162 points, extending its losing run to the sixth day, on fag-end selling after RBI dashed hopes of a rate cut and Samajwadi Party's sudden announcement of candidates for 2014 polls made investors nervous over the political situation. Eurozone debt worries and rupee trading above 55-level against dollar also impacted the sentiment.
After a better start at 18,563.32, the Sensex erased early gains of around 92 points after selling in rate-sensitives gathered pace in the last half hour of trading.
RBI Governor D Subbarao said in Pune that at 7.45 percent inflation is certainly "quite high". Traders said after headline inflation fell to an 8-month low in October, investors had hoped for a rate cut. However, Subbarao's comments poured cold water on such hopes, they added. The sentiment took a further hit when Samajwadi Party announced the first list of candidates for 2014 polls, taking everyone by surprise.
"The market also feels Mulayam Singh Yadav's Samajwadi Party has revived the possibility of early elections by releasing the first list of candidates at least 15-18 months before polls are scheduled," said Rikesh Parikh, Vice President Equities, Motilal Oswal Securities.
The 30-share Sensex finally closed 162 points, or 0.88 percent, lower at 18,309.37 -- a level last seen on September 20. ICICI Bank lead the 24 losers in 30-share Sensex, followed by Tata Motors, SBI, Bhel, Maruti and HDFC.
The NSE 50-share Nifty also dropped by 56.95 points, or 1.01 percent. to finish at nearly two-month low of 5,574.05. Barring Hong Kong and Japan which closed with gains, other Asian markets ended up to 0.77 percent lower.
For the week, the Sensex and the Nifty were down by about 2 percent on concerns over the so-called US 'fiscal cliff', worries over India's fiscal deficit and weak macro data, said Dipen Shah, Head of PCG Research, Kotak Securities.
The mood also turned cautious ahead of the Winter session of Parliament, which starts on November 22. Key economic agenda for the session includes amendment to the Insurance Bill to raise FDI cap from 26 to 49 percent, Banking Regulation Amendment Bill and Direct Taxes Code.
Weakness in the European markets in their afternoon trade after data showed the euro zone had slipped into recession, also affected the market sentiment. Key indices in London, France and Germany declined by 0.48-0.82 percent.
Back home, major losers from the Sensex pack were ICICI Bank (2.65percent), Tata Motors (2.64 percent), Cipla (2.33 percent), HUL (2.27 percent), SBI (2.13 percent), Hindalco (2.11 percent), BHEL (1.94 percent), Gail India (1.94 percent), Maruti Suzuki (1.89 percent), HDFC (1.78 percent), L&T (1.55 percent), Tata Steel (1.52 percent), Sterlite Ind (1.52 percent), Bajaj Auto (1.20 percent), RIL (1.18 percent), Tata Power (1.05 percent) and Hero Motocorp (1.02 percent).
Kishor Ostwal, CMD, CNI Research Ltd said: "The Nifty fell below the support level of 5630...lukewarm response to 2G spectrum auction and high fiscal deficit are also worries."
Among the sector indices, the BSE-Realty dropped by 3.36 per cent, followed by Bankex (1.61 percent), BSE-Auto (1.50 percent), BSE-CG (1.44 percent), BSE-FMCG (1.36 percent) and BSE-Power (1.14 percent).
The market breadth coninued to remain negative as 1,738 stocks finished with losses while 1,112 closed with gains. The total market turnvoer dropped to Rs 2,387.83 crore from Rs Rs 2,526.45 crore on Thursday.
"The poor economic data like exports and fiscal deficit continues to be a worry for Indian markets," said Alex Mathews, Head Research, Geojit BNP Paribas Financial Services.