The key benchmark indices continued to trade lower amid weak global cues in the afternoon deals. The RBI’s credit policy failed to lift investor sentiments. The Sensex was down 111 points at 16,628 levels and the Nifty dropped 0.7 per cent to 4,933.

The Reserve Bank of India in its credit policy left key rates unchanged. But the central bank increased its statutory liquidity ratio to 25 per cent from 24 per cent.

The RBI also raised its FY10 inflation forecast to 6.5 per cent as against the earlier estimate of 6 per cent. It, however, cut its FY10 credit growth forecast to 18 per cent from an earlier estimate of 20 per cent.

Heavy selling pressure was seen in realty and metal counters. The realty index on the BSE plunged 5 per cent and the BSE metal index slid 3.3 per cent. The power index also lost 1.3 per cent. 

Among the Sensex stocks, Sterlite Ind and DLF were the biggest losers in the group. The stock shed over 4 per cent each. Bharti Airtel, RCom and Tata Power were the other major losers in the pack. The stocks fell over 3 per cent each.

However, Wipro was the biggest gainer in the group. The stock was up 3 per cent after the company reported 18.76 per cent increase in its consolidated net profit at Rs 1,161.7 crore for the second quarter ended September 30, 2009.

A strengthening dollar and worries about an overheated market pounded US stocks on Monday. The Dow fell 104.22, or 1.1 percent, to 9,867.96. The broader Standard & Poor's 500 index fell 12.65, or 1.2 percent, to 1,066.95. The Nasdaq fell 12.62, or 0.6 percent, to 2,141.85.

The Asian markets also fell today on the back of losses in US markets. Hong Kong’s Hang Seng shed 1.5 per cent and Japan’s Nikkei dropped 1.4 per cent. South Korea’s Kospi was down 0.4 per cent.

(With inputs from agencies)