After opening steady in the morning, the Indian equity markets nosedived to close in the red.
The Sensex closed at 18309.37, down 0.88 percent and the Nifty at 5574.05, down 1 percent on domestic economic worries.
RBI Governor D Subbarao said on Friday, that India’s inflation rate of 7.5 percent is still high, adding the RBI was on alert to manage both growth and inflation.
Additionally, finance ministry officials said have that India will struggle to meet its already swollen deficit target this year after a dismal response to this week's 2G auction and a battle to sell stakes in state companies.
Global rating agencies have threatened to downgrade India's sovereign credit rating to junk if it fails to put its fiscal house in order. Analysts said while the disappointing auction would likely not be a deciding factor, it underscored the challenges facing the government in trying to slash the deficit.
Meanwhile, determined to reform India's banking sector, Finance Minister P Chidambaram has also asked the Reserve Bank of India to expedite the process of issuing new bank licences.
After a dismal response to the 2G auctions, the government intends to hold an auction of mobile phone airwaves that were left unsold at a sale this week before March 31, the telecommunications minister, Kapil Sibal, said.
Among the sectoral indices, bank stocks which rallied yesterday closed in the red today. Capital goods and auto stocks also closed lower today.
Stocks in news
Biocon closed 4.74 percent down as the company's pact with Bristol-Myers was conditional on the success of the trial of its oral insulin drug.
Bharti Airtel was up 3.47 percent after Bank of America-Merill Lynch upgraded the stock.
Idea Cellular (0.11 percent) was also marginally up.
Kingfisher Airlines continued to be beaten down, closed at 4.83 percent after it sought more time to submit its revival plan.