Indian markets slipped to the day's low in the last hour of trade. The Sensex was down 245 points or 1.3% at 18,183 and the broader Nifty index traded 88 points lower at 5,519 at 1430 hours.
Almost all sectoral indices on the Bombay Stock Exchange traded deep in the red indicating a broad based selling pressure. Analysts said a correction was in the offing considering the way markets had shot up over the past few weeks.
"The market was pretty overbought...and one of these profit taking events was likely to happen," Mahesh Patil of Birla Sun Life AMC told NDTV Profit today.
"This is a much need correction. Over the last 35 working sessions, we have got Rs 26,000 crore of FII money and DIIs have sold Rs 4000 crore... There was a feeling in the Street that locals were left out in the rally. I think it's a much needed and healthy correction," Sushil Choksey, Director of Rosy Blue Securities said.
The biggest selloff came in high beta stocks like metals (-3.5%) and realty (-5.1%). Banking stocks (-3.1%) were under huge selling pressure too. Power (-2.9) stocks also saw profit booking after running up over the last few sessions. IT stocks (0.9%) were the only one to trade higher.
Only 7 of the 50 stocks on the Nifty index traded higher. The market breadth was extremely weak with only 16% stocks rising on the broader BSE 500 index.
Shares of State Bank of India saw strong selling pressure on reports that the public lender will provide a Rs 1,200 crore bailout package for debt laden Kingfisher Airlines. SBI, India's largest bank by assets, is Kingfisher Airlines' largest lender, at Rs 1,400 crore.
SBI stocks traded 8 per cent lower at Rs 2,257.40 on the Bombay Stock Exchange at 1514 hours today. Shares of Punjab National Bank, which is likely to provide a guarantee to the airline, slumped 4.3 per cent at Rs 1,025.15 on the BSE.
Meanwhile, shares of Kingfisher Airlines also dropped after trading higher for most part of the session. Earlier, stocks of the company had soared nearly 5 per cent but it traded 5.8% per cent lower at Rs 25.25 on the BSE.
Earlier, the benchmark indices had opened lower but had seen a recovery after the Prime Minister's panel said it expected the economy to grow by between 7.5 and 8% in FY13. This year the economy is likely to grow at 7.1%, slightly higher than the government's earlier forecast.