The BSE Sensex plunged over 300 points, its biggest fall since July 2012, amid a global selloff on Thursday.
Domestic shares fell in line with weak global equities that declined on market talk that a hedge fund had been liquidating large positions in commodities, as well as worries the Federal Reserve could slow its bond buying program. (Read full story here)
"There is risk off trade across the globe. Everywhere there is selling, so we are also going down," Piyush Garg, chief investment officer at ICICI Securities said.
The Sensex closed 317 points or 1.62 per cent lower while the Nifty declined 91 points to 5,852. The rupee traded at a one-month low of 54.52 to the dollar, while gold prices in India hit a seven-month low. (Read)
"This is the first sign of a selloff. Private sector banks, ICICI Bank, Yes Bank, which held out so far have started to fall. A close below 5,825 on the Nifty, which is the 20-week exponential average, will send markets to 5,600 levels," Anil Manghnani, director at Modern Shares & Stock Brokers said.
Barring consumer durables, all groups of stocks closed lower on the BSE. The BSE Consumer Durables index managed to stay in green on account of over 5 per cent gain in Videocon. (Read: Why Videocon gained)
High beta stocks such as metals and realty saw sharp downsides. The BSE Bankex slipped 2.5 per cent a day after RBI data showed that loan growth continues to remain a concern.
Banks' advances grew 8.7 per cent so far this fiscal year, compared with 11.2 per cent a year earlier, while deposit growth was 7.8 per cent compared with 11.4 per cent in the same period a year earlier.
Private lender ICICI Bank closed 3.75 per cent lower while State Bank of India shares declined 1.8 per cent lower.
47 stocks ended lower on the Nifty led by Jindal Steel and Power, which plunged 4 per cent. Tata Steel also declined 4 per cent. Infra major Jaiprakash Associates, iron ore miner Sesa Goa, Reliance Infra, aluminium maker Hindalco and infra lender IDFC shed 3-4 per cent.
Drug maker Cipla, state-run Gail India and two-wheeler major Bajaj Auto were the only gainers on the Nifty.
Kingfisher Airlines shares close up by their daily limit of 5 per cent for the fourth straight day though other aviation stocks such as SpiceJet fell sharply after Malaysia based AirAsia said it plans to start India operations. (Read full story here)
Shriram Transport Finance shares sunk 7 per cent after U.S. private equity firm TPG Capital planned to sell part of its stake in the company to raise about $300 million, according to a term sheet seen by Reuters.
Will the markets fall further? Analysts said a sharp fall, like today, is unlikely. Parag Doctor, head (trading strategies) at Keynote Capitals said the Nifty has strong support at the 100 day moving average near 5,840, while 5,925-5,950 is the likely upside.
"Short covering is likely because traders would not like to go into a big event (the Budget) with open positions," Mr Doctor added.
(With inputs from Reuters)