Rumours that Communist Party of India (CPI) Marxist was withdrawing its support to the Congress led United Progressive Alliance (UPA) Government too took toll on the markets during the final hour of the trading session. Later, CPI (M) general secretary, however, refuted the rumours.
The 30-share Sensex of the Bombay Stock Exchange (BSE) fell by 108 points or 0.64 per cent to close at 16,752. The broader index CNX S&P Nifty of the National Stock Index (NSE) was down 1.09 per cent or 55 points at 4,957. The BSE Oil & Gas index fell by 2.56 per cent.
"Markets are likely to witness some downside as inflation and rising crude prices are major concern and the depreciating rupee too is adding fuel to the fire. Foreign funds are not aggressively buying into markets as industrial growth data clearly states that economic fundamentals were weakening," said Anita Gandhi, head of institutional business at Arihant Capital Services Ltd.
As per the provisional figures foreign institutional investors (FIIs) were net buyers of stocks worth Rs 73 crore while domestic intuitions made purchases worth Rs 266 crore in the cash segment of equity markets.
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Crude oil declined after touching a record $126.40 a barrel in New York amid signs that rising prices may curb demand in emerging markets. Crude oil for June delivery fell $1.73, or 1.4 per cent, to settle at $124.23 a barrel on the New York Mercantile Exchange.
The stock of public sector oil major Oil & Natural Gas Corporation Ltd (ONGC) slipped 3.08 per cent at Rs 997. Reliance Petroleum was down 2.06 per cent at Rs 178.20. Top looser among the oil counters was Cairn India Ltd down 8.48 per cent at Rs 277.
Among other Sensex stocks Bharti Airtel Ltd slid 2.03 per cent at Rs 821 after a potential rival emerged for South Africa's MTN Group. UAE's Emirates Telecommunications Corp said on Monday it was evaluating a bid for MTN. Bharti's shares have lost 8.3 percent after the firm said last week it was in exploratory talks with MTN as traders were of the view that the company might to raise its indicative offer, which media reports valued MTN at about $37 billion.
DLF Ltd, the country's largest real estate developer in terms of market capitalisation shed 1.25% to Rs 614.10. As per reports, the company will file papers for $2 billion real estate investment trust (REIT) with the Singapore authorities next month.
Overall 50.65 per cent or 1,410 stocks advanced against the declines of 46.88 per cent or 1,305 stocks. The rest 2.48 per cent or 69 stocks remained unchanged.
The Asian markets were trading higher barring China's Shanghai Composite which fell 1.84 per cent on uncertainty following a deadly earthquake in south-west China on Monday this week and the central bank's announcement of the fourth bank reserve ratio hike this year.
Meanwhile, Hang Seng gained 1.95 per cent. Nikkei was up 1.53 per cent and Taiwan Weighted managed to gained 1.81 per cent.