Indian equities gave up early gains to settle lower on Thursday due to sell-offs mainly in banking stocks after the Reserve Bank directed banks to link interest rates on all new loans with external benchmarks.
Losses on the indices, however, were restricted by emergence of buying in stocks of somewhat relieved auto sector after Union Transport Minister Nitin Gadkari assured the crisis-hit industry of all possible support.
After rising over 174 points in early session, the 30-share Sensex failed to sustain the momentum and gave up all gains to end 80.32 points, or 0.22 per cent, lower at 36,644.42. It hit an intra-day high of 36,898.99 and low of 36,541.88.
The broader Nifty, on the other hand, ended 3.25 points, or 0.03 per cent, higher at 10,847.90.
Banking and IT stocks were mainly responsible for bringing the benchmark indices -- Sensex and Nifty -- under pressure. A significant rise in the rupee value was the reason behind the selling in shares of export-oriented IT companies.
Top laggards in the Sensex pack included HDFC, ICICI Bank, TCS, HCL Tech, Kotak Bank, Asian Paints, TechM and HUL, dropping up to 2.67 per cent.
On the other hand, Tata Motors, ONGC, Yes Bank, NTPC, Maruti, M&M, Vedanta, Tata Steel and Bajaj Auto rallied up to 7.81 per cent.
Sectorally, BSE oil and gas, metal, auto, utilities, power, industrials, healthcare and energy indices rose up to 2.47 per cent.
While BSE realty, finance and banking indices fell up to 1.77 per cent.
Broader BSE midcap and smallcap indices outperformed benchmarks, rising up to 0.72 per cent.
"The Reserve Bank has made it mandatory for banks to link their new floating rate for home, auto and MSME loans to an external benchmark from October 1 so that the borrowers can enjoy lower rate of interest. However, that triggered a sell-off in bank stocks, especially in private banks, which closed in the negative," Shrikant S Chouhan, Senior Vice President (Equity Technical Research), said.
Boosting market sentiments, Gadkari assured the crisis-hit auto sector of all possible support, including taking up the demand of GST reduction with Finance Minister Nirmala Sitharaman.
He also stated that the government had no intention to ban petrol and diesel vehicles, clearing the air after rumours were doing the round that the move to push e-mobility will result in end of the road for traditional petrol and diesel vehicles.
Market opened in green following positive global cues from Asian markets as withdrawal of a controversial extradition bill in Hong Kong and on the back of news that the US and China had agreed to meet in early October for another round of trade negotiations, Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers, said.
However, the global positive cues failed to sustain momentum by noon as domestic sentiments turned pessimistic following a cut in GDP growth estimates by Crisil, he said, adding that the market seemed lacking direction by end of day's trade as it awaits some more policy announcements from the government.
Stating that the slowdown as deeper and more broad-based than suspected, domestic rating agency Crisil on Wednesday cut its GDP forecast for FY20 to 6.3 per cent from 6.9 per cent earlier.