Not able to connect when loopback address is 127.0.0.1

When I try to connect from vSphere client, I see the below error.

vSphere Client couldnot connect to "myMachine" An unknown connection error occured. (The request failed because of a connection failure. (Unable to connect to the remote server))

But, when the loopback address is anything else - say 127.0.0.4, it works perfectly fine. I am connecting from Windows server 2003.

127.0.0.1 localhost is the only entry in my host file. Even if i change it any of the below, the same problem persists

127.0.0.1 localhost myMachineName

                    or

127.0.0.1 myMachineName

Any help will be greatly appreciated