Benchmark Sensex slumped more than 350 points on Wednesday in line with a wider global market meltdown after the US and China escalated their trade tensions with a fresh round of retaliatory tariffs.
Domestic investors were also reluctant to expand their portfolios ahead of the RBI's monetary policy review, brokers said.
Sentiment dampened after China today decided to impose new tariffs on 106 American products, including aircraft and cars, as the world's two largest economies edged closer towards an all-out trade war.
The move comes after the Trump administration on Tuesday published a list of about 1,300 Chinese exports that could be targeted for tariffs. The 30-share Sensex opened positive and advanced to a high of 33,505.53 but succumbed to a sudden sell-off in the afternoon, hitting a low of 32,972.56. It finally ended 351.56 points or 1.05% down at 33,019.07.
This is the benchmark's biggest fall since March 23, when it had lost 409.73 points.
The broader NSE Nifty, after scaling the day's high of 10,279.85, slipped into the negative terrain to 10,111.30 before closing at 10,128.40, down by 116.60 points, or 1.14%.
"Market slid 2% from the day's high due to looming trade war tensions and caution ahead of RBI policy meet. Global market volatility continued to give a ripple effect to the market despite gradual recovery in domestic economy and moderation in inflation.
"RBI's policy is likely to support near term sentiment while clarity on earnings growth and monsoon will give more transparency in direction," said Vinod Nair, Head of Research, Geojit Financial Services. The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, started its two-day meeting on Wednesday amid little hope of a cut in the key policy rate because of hardening global crude oil prices.
