The BSE benchmark index, which had lost 72 points in the previous session, opened marginally higher amid mixed Asian cues but shares in capital goods, PSU, banks, FMCG and IT faced selling pressure throughout the session.
The Sensex fell by 206.23 points, or 1.22 per cent to 16,639.82, a level last seen on June 7.
Shares of ITC -- the most influential stock in Sensex -- closed 2 per cent down, after its first quarter revenue at Rs 6,552.21 crore and profits at Rs 1,602.14 crore could not beat expectations.
"We continue to remain neutral on the stock, as we believe it is fairly priced at current levels," said V Srinivasan, Research Analyst, Angel Broking.
Twenty two stocks including Tata Power, Wipro, and SBI closed lower in the 30-share index. Tata Motors was the worst hit at 3.8 per cent.
Fears of rising inflation, driven by possible hikes in fuel and commodity prices, have stoked worries that Reserve Bank of India might keep rates unchanged on July 31 even as the rain situation continues to be poor, brokers said.
"Deficient monsoon witnessed in the country is continuously putting pressure," said Nidhi Sarswat, Senior Research Analyst, Bonanza Portfolio.
Real estate stocks suffered the most damage with the sectoral index losing over 3 per cent with DLF falling 2.85 per cent while Parsvnath Developers tanked 20 per cent.
The capital goods index dropped over 2 per cent as L&T counter faced selling while Bhel fell 1.8 per cent after its Q1 margins and order intake appeared lacklustre, traders said.
The 50-share NSE Nifty tumbled by 66.60 points to 5,043.
Meanwhile, the rupee was last trading at 55.99 a dollar compared to its previous close of 56.16. (MORE)
