The BSE Sensex came off seven-month highs today after logging its biggest single-day fall in three weeks, mirroring global caution ahead of the US Fed meet and hit by an IT sell-off after Infosys flagged volatility issues for the next few quarters.
The index plunged 257.20 points or 0.95 per cent to crack below the 27,000-mark.
There were also concerns that the recent gains in crude oil prices could adversely impact India's fiscal deficit situation and increase fuel price inflation.
"The market tanked as weak European cues and surge in oil price have turned investors risk averse," said Vinod Nair Head of Research Geojit BNP Paribas Financial Services.
India's second-largest software services firm Infosys was the worst performer with a plunge of 4.27 per cent at Rs 1,185.45 after the company said challenges in retail, energy and insurance sectors could result in "quarterly bumps". TCS followed suit and slumped 1.27 per cent to Rs 2,577.50.
Participants also preferred to cut down on their positions ahead of key economic data Industrial Production data due for tomorrow.
The Sensex resumed lower at 26,994.48 and dropped further to 26,692.35 before finishing at 26,763.46, disclosing a loss of 257.20 points or 0.95 per cent. The gauge had risen by 243.21 points in the past two days.
The NSE 50-share Nifty also dropped by 69.45 points or 0.84 per cent to close at 8,203.60.
The broader markets too felt the heat with the BSE mid-cap index falling 0.47 per cent while small-cap edged up by 0.04 per cent.
In stock specific action Hero MotoCorp fell close to 3 per cent after it reported decline in sales in May. Maruti Suzuki and Tata Motors however perked up.
Regional markets ended lower as investors weighed risks ahead of the US Federal Reserve meet next week. Japan, Singapore and South Korea based shares dropped by 0.14 per cent to 0.97 per cent.
European shares extended initial losses, dropping for a second-straight day after European Central Bank's President Mario Draghi warned Europe is at risk of suffering lasting economic damage from weak productivity and low growth.
Key indices like France, Germany and the UK fell between 0.82 per cent and 1.17 per cent.
Lupin Ltd suffered the most among Sensex constituents by
falling 5.03 per cent to Rs 1,607.60 despite the company today reporting an increase of 55.12 per cent in its conslidated net profit to Rs 881.95 crore.
Other big losers from the index included HDFC Ltd, Power Grid, Hero MotoCorp, M&M, Tata Steel, Bharti Airtel, Bajaj Auto, L&T, GAIL, Sun Pharma, Maruti Suzuki, Cipla, Adani Ports and Asian Paint, falling by up to 1.81 per cent.
Sector-wise, the BSE oil&gas index fell the most by 0.88 per cent, followed by healthcare 0.71 per cent, metal 0.69 per cent, FMCG 0.58 per cent, auto 0.57 per cent, capital goods 0.36 per cent, realty 0.25 per cent and power 0.20 per cet.
In line with the trend, the small-cap index shed 0.45 per cent and mid-cap 0.35 per cent.
Meanwhile, foreign portfolio investors (FPIs) bought shares worth a net Rs 1,156.19 crore yesterday, as per provisional data released by the stock exchanges.
Towards the global market, other Asian markets closed higher as fresh Chinese data provided signs of improving conditions for the world's second largest economy.
China's Shanghai Index rose 0.71 per cent and Japan's Nikkei advanced 0.69 per cent, but Hong Kong's Hang Seng closed 0.13 per cent down. European markets were stable at the open after a dip on Wall Street in yesterday's trade.
Frankfurt's DAX 30 gained nearly 0.56 per cent, while France Paris CAC 40 rose 0.45 per cent. London's FTSE rose 0.34 per cent.
