The benchmark BSE Sensex, reversing its 2-day rally, today fell almost 382 points to close at over a two-month low of 25,482.52, as worries persisted due to a deteriorating global risk environment and investors waited for US Fed minutes of the last policy meeting.
Concerns about muted September earnings, profit-booking by participants after recent gains and sustained capital outflows by foreign funds dampened stocks, brokers said.
Weighed down by heavy selling in blue-chips, the BSE Sensex stayed in the negative zone for the most part of the session and closed down 381.95 points, or 1.48 per cent, at 25,482.52 -- a level last seen on September 8.
The 50-share NSE Nifty cracked below the 7,800-mark to hit a low of 7,725.05 before settling lower by 105.75 points, or 1.35 per cent, at 7,731.80. During the session, it touched a high of 7,843.40.
"A weakening rupee against the American currency also negatively impacted market sentiment," said Manoj Choraria, a Delhi-based NSE stock broker.
At the forex market, the rupee was trading 25 paise lower at 66.28 a dollar (intra-day).
Hindalco suffered the most by plunging 5.07 per cent.
Technology stocks continued to remain under pressure for yet another session, with the worst hit BSE IT index down 2.29 per cent.
Infosys, which warned about margin pressure in third quarter on Monday, slumped 3.89 per cent while TCS tumbled over 1.61 per cent.
Bucking the trend, Coal India surged 0.83 per cent after the Cabinet approved sale of 10 per cent in the company.
The broader markets too displayed a weak trend as investors trimmed their positions. The BSE small-cap index edged lower by 0.71 per cent while mid-cap shed 0.68 per cent.
There were heightened fears of selling as foreign investors net sold shares worth Rs 492.45 crore yesterday, provisional data showed.
On the global front, Asian markets ended lower, with Shanghai shares falling by 1.01 per cent. Europe was also trading down in early trade as investors stayed cautious before the release of Fed minutes.
"The worries over the FOMC minutes and Chinese economy weighed on sentiment of the broader market. The minutes of the FOMC will unveil the possibilities of a rate hike in December. IT stocks were also impacted by the concerns over H1-B visa," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services Ltd.
Investors are watching for key US economic data due for release this week, which will dictate the trend.
As many as 26 components out of the 30-share Sensex ended in the red. The market breadth turned negative as 1,615 stocks ended lower, 1,046 finished in the green while 185 ruled flat.
The total turnover rose to Rs 2,930.83 crore, from Rs 2,519.82 crore yesterday. Pramit Brahmbhatt, Veracity Group CEO, said, "Expectations of a Fed interest rate hike and worsening global risk environment forced blue-chip and price sensitive shares to trade weak, which strained indices to slump over one and a half percent for the day."