BSE Sensex
BSE SensexReuters

Stock markets in India fell in the week as investor confidence was weighed down by the lowering of the country's growth forecast for the current fiscal year by the government, indicating that the economy continues to weaken.

The BSE Sensex fell 0.5 percent in the week and closed at 19242. The Nifty also dropped 0.5 percent and closed at 5847.70 points.

On Monday, the government lowered the country's economic growth forecast for the fiscal year 2012, indicating that it was in need of stimulus measures to boost the weakening economy. According to the mid-year economic review released Monday by the Finance Ministry, India's economy is expected to expand between 5.7 and 5.9 percent for the fiscal year 2012, down from the earlier estimate of 7.6 percent.

Amid the growing concerns about the deteriorating growth prospects of the country's economy, market players are calling for urgent policy easing measures from the central bank.

Earlier this week, the Ministry of Commerce and Industry reported that India's Wholesale Price Index (WPI) rose at a slower rate in November than in the previous month, showing the signs of a gradual decline in price pressure to make room for monetary easing. Investors felt that inflation may no longer be the main concern of policymakers and the government may have more space to ease the monetary policies and make supporting of economic growth a priority.

However, on Tuesday, the Reserve Bank of India decided to keep the key interest rates and cash reserve ratio unchanged. The RBI said that it was keeping the CRR and policy repo rate unchanged at 4.25 percent and 8.0 percent respectively.

"The seasonally adjusted three-month moving average annualized momentum indicator also points to ebbing of inflationary pressures. However, in striking contrast to wholesale inflation developments, retail inflation remained elevated," the central bank said in a statement.

Investors were also focusing on whether the U.S. Congress would reach a deal to avert the fiscal cliff. Market players worry that unless the Congress acts, the scheduled rise in tax rates and spending cuts will plunge the economy into recession early next year.

Major Losers: Shares of Cairn India declined 3.90 percent. Shares of Kotak Bank dropped 2.29 percent and those of Reliance Industries Ltd fell 1.94 percent.