The BSE Sensex closed the day at 405 points lower at 17,196 points, while the Nifty plunged to close the day 136 points lower at 5228 points.

Markets which were trading mildly positive before the rail fare rollback, began to decline as soon as the rollback was announced. Marketmen fear that populist measures will retard economic development and see the fiscal deficit burden increasing. Analysts are also weary that the government is not able to push through the reforms agenda and the fare rollback was a sign of weak governance.

Poor cues from Europe also dragged the markets lower. Among the major losers today were Jindal Steel, Jaiprakash Associates, IDFC and Reliance Infrastructure. Among the few gainers was Coal India.

Markets are now awaiting the RBI decision on repo rates cuts, which if implemented might see markets gaining ground.

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