Disappointing earning results, coupled with negative global cues and a slump in crude oil prices dragged the Indian equity markets to their lowest levels in 2016 on Wednesday.
Indian markets continued to decline for the third consecutive day amid weakness in the global equity markets.
Bearish sentiments led a barometer index of the Indian equity markets to close the day's trade down 262 points.
Selling frenzy led both the bellwether indices of the Indian equity markets to touch their new 21-month closing lows. The bellwether indices even touched their new 52-week lows during the intra-day trade.
The Nifty volatility index, India VIX closed at 22.46, up around 3.39 percent, indicating uncertain market condition.
Initially, both the indices opened on a weak note in sync with their Asian peers, especially the Japanese index.
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The selling pressure was accelerated by absence of any fresh positive trigger and below expected third quarter (Q3) results.
Investors were disappointed with poor earnings results from the banking sector and lower guidance from an information technology (IT) major.
The decline of crude oil prices below $30 a barrel (one barrel is equal to 159 litres), as well as German IIP's (index of industrial production) fall dented sentiments.
Investors' doubts over the central government's ability to perk up investments dragged the markets lower.
In addition, a volatile rupee kept investors on the knife's edge. However, it gained six paise at the close of the day's trade and stood at 67.84 to a US dollar from its previous close of 67.90 to a greenback.
"Indian rupee had weakened at the open, depreciating from 67.90 to 67.98, but RBI intervention and selling of US dollar from custodian banks pushed it back towards 67.82/83 levels on spot," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
"A risk on rally in the European stocks has failed to ignite a similar response over here."
Investors' confidence was further eroded by long-liquidation positions and disappointing macro-data for the third quarter growth figures.
Besides, investors were unnerved ahead of the semi-annual monetary policy testimony by US Fed chairman Janet Yellen to the US House financial services committee later Wednesday.
The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) plunged by 262 points or 1.09 percent. It has lost over 858.07 points or 3.61 percent in the last three sessions.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended the day's trade deep in the red. It was down by 83 points or 1.13 percent at 7,215.70 points.
The NSE Nifty touched a new 52-week low at 7,177.75 points. This is Nifty's lowest closing since May 16, 2014.
It has slide by 273.4 points or 3.78 percent during the last three days trade.
The S&P BSE Sensex, which opened at 23,938.32 points, closed at 23,758.90 points -- down 262.08 points or 1.09 percent from the previous day's close at 24,020.98 points.
This is Sensex's lowest closing since May 12, 2014.
During the intra-day trade, the Sensex touched a high of 23,938.32 points and a low of 23,636.72 points -- its new low in 52 weeks.
The BSE market breadth favoured the bears -- with 2,036 declines and only 608 advances.
"Profit bookings from the last few day's has finally matured into full-fledged panic selling today. The lower closing of Japanese markets, crude oil slump and disappointing results have all contributed to this panic selling," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that the midcap and small cap indices also declined significantly with an advance decline ratio of 1:3.
"We expect some value buying to emerge at lower levels as the correction has been quite sharp this week," explained Agarwal.
Nitasha Shankar, vice president for research with YES Securities, elaborated that Indian benchmark indices on a new 52-week lows suggested a prolonged bearish period for the markets.
All sector-based indices of the BSE except for energy sector ended in the red.
The S&P BSE banking index plunged by 343.91 points, healthcare index plummet by 246.73 points, automobile index receded by 193.33 points, fast moving consumer goods (FMCG) index declined by 101.48 points and capital goods index edged-lower by 78.51 points.
However, the S&P BSE energy index closed flat.
The foreign institutional investors (FIIs) were net sellers during the day's trade, while the domestic institutional investors (DIIs) bought stocks.
The data with stock exchanges showed that FIIs divested Rs.751.33 crore, while the DIIs' bought stocks worth Rs.196.92 crore.
Major Sensex gainers during Wednesday's trade were Coal India, up 1.57 percent at Rs.314.05; Larsen and Toubro, up 0.73 percent at Rs.1,122.60; Maruti Suzuki, up 0.72 percent at Rs.3,683; Reliance Industries, up 0.61 percent at Rs.962.40; and Sun Pharma, up 0.28 percent at Rs.856.60.
Major Sensex losers during the day's trade were Tata Motors, down 6.04 percent at Rs.291.85; State Bank of India (SBI), down 4.82 percent at Rs.158.95; HDFC, down 3.71 percent at Rs.1,116.80; Adani Ports, down 3.57 percent at Rs.202.55; and Cipla, down 3.17 percent at Rs.538.85.