Steel stocks fell 0.3%, weighing down on the broader indexes, after the CAG draft said India lost up to $210 billion in revenue by selling coal deposits too cheaply.
The report from the Comptroller and Auditor General's (CAG) office, leaked to a newspaper, is making traders worried about a potential new scandal that could hurt foreign investments and hit a sector reliant on coal
"Steel, which is the backbone of country's infrastructure, will be in a big mess if this report by CAG is true, said Vivek Mahajan, head of research at Aditya Birla Money.
"This has the potential to scare off FDI as well as FIIs from India," he added, referring to the foreign investor flows that are crucial to Indian stock markets.
Jindal Steel And Power, one of the companies listed by Times of India as benefiting from the reported sale of coal deposits, dropped 5.8%.
A Jindal company official could not immediately be reached for comment despite several attempts at a response.
