Unable to resolve hostname when "hosts: files [!NOTFOUND=return] dns" entry is used in nsswitch.conf

Issue

Unable to resolve hostname when hosts: files [!NOTFOUND=return] dns entry is used in nsswitch.conf

I can ping the host who's entry is in /etc/hosts when nscd is not running but not when nscd is running.

# ping <URL>
ping: unknown host <URL>
# service nscd stop
# ping <URL>
PING <URL> (xx.xx.xx.xx) 56(84) bytes of data.
64 bytes from <URL> (xx.xx.xx.xx): icmp_seq=1 ttl=64 time=0.059 ms
64 bytes from <URL> (xx.xx.xx.xx): icmp_seq=2 ttl=64 time=0.029 ms
64 bytes from <URL> (xx.xx.xx.xx): icmp_seq=3 ttl=64 time=0.027 ms