Investors gave a thumbs-down to RBI's fresh measures to stem the rupee slide as Sensex today erased the initial 158-point gain and closed 90 points down as the widely-anticipated steps did not match market expectations amid the currency plunging close to 58 levels.

The BSE benchmark Sensex had climbed to a seven-week high of 17,132.15 during the day as global agency Moody's retained outlook on India's rating at ‘stable’ despite slowdown in GDP growth rate.

However, the markets lost momentum and Sensex touched a low of 16,853.05 after RBI hiked FII limit in government bonds to USD 20 billion while allowing up to USD 10 billion via overseas borrowings route by domestic corporates for refinancing their rupee loans.

The steps are expected to curb rupee's fall, which has lost over 26 per cent in last one year.

The 30-share Sensex closed at 16,882.16, down 90.35 points or 0.53 per cent as 21 counters including Hero MotorCorp, Hindalco, ONGC, Cipla and State Bank of India fell in the 2-3 per cent range.

Investors wealth across the market dropped by over Rs 26,000 crore as 1,420 stocks fell while 1,334 rose.

"The way the FM had made comments on projected announcements, the market had built up huge expectations such as rate cut and amnesty scheme. ECB limits and FII investments never help for immediate cure...this disappointed the street," said Kishor P. Ostwal, CMD, CNI Research.

Sectors like banking, auto, metal and realty stocks faced investor wrath even though index heavyweight Reliance bucked the trend by closing up 0.72 per cent. The rupee, which breached the 57-level on June 22, opened in the positive zone against the dollar but soon after RBI measures were announced, it sharply fell to 57.92. However, it recouped some losses and was last trading at 57.10.

"The RBI steps is considered not as significant enough to help India Inc from taking benefits of the foreign money and also to arrest rupee fall," said D.K. Aggarwal, CMD, SMC Investments and Advisors. Similarly, the 50-share NSE index Nifty fell by 31.40 points, or 0.61 per cent to 5,114.65.

Asian markets also ended lower as concerns about the global economy and the debt crisis in Europe continued to weigh on investor sentiment.

Key benchmark indices in Singapore, Japan, China, Taiwan, South Korea and Hong Kong declined by 0.51 per cent to 1.63 per cent. European markets were also trading lower in their early trade as key indices like France's (CAC), Germnay's (DAX) and London (FTSE) declined by 0.75 per cent to 1.47 per cent.

Foreign Institutional Investors (FIIs) pulled out Rs 174.22 crore on last Friday as per provisional data with stock exchanges.

According to analysts, the market may remain volatile for next few days due to expiry derivatives contract on June 28.

"As the market nears expiry week, cautious approach is recommended since volatility is expected to be high," said Shanu Goel, Senior Research Analyst, Bonanza Portfolio. Out of the 30-share Sensex pack, only seven scrips ended with gains while Hindustan Unilever closed unchanged. Major losers from the Sensex were Hero MotoCorp (2.72 pc), Hindalco (2.35 pc), ONGC (2.31 pc), Cipla (2.26 pc), SBI (1.94 pc), BHEL (1.63 pc), TCS (1.46 pc), HDFC Bank (1.27 pc), Jindal Steel (1.21 pc) and M&M (1.15 pc).

However, Maruti Suzuki firmed up by 1.14 per cent and Gail India rose 0.76 per cent. Among the sectoral indices, the BSE-Bankex dropped by 1.02 per cent followed by the BSE-Power (0.94 pc), the BSE-PSU (0.85 pc), the BSE-Metal (0.72 pc), the BSE-Realty (0.71 pc) and the BSE-IT (0.67 pc). The total turnover dropped to Rs 1,916.53 crore from the last Friday's level of Rs 2,086.60 crore.