Breaking its two sessions of gains, the benchmark Sensex today fell over 49 points after oscillating for most part of the day as mood remained cautious ahead of derivatives expiry in a holiday-shortened week.
Investors remained risk-averse following a weak closing in Asia, subdued commodity prices on a rising dollar and deepening concerns over China demand and a lower opening in European markets.
The gauge opened higher, but fell to a low of 25,747.01 as participants started booking profits in recent gainers.
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At the close, it was down 49.15 points, or 0.19 per cent at 25,819.34.
The index had risen 385.97 points in the past two sessions after the government announced a 3 per cent interest subsidy for exporters running for five years and Fed minutes showed that the US top bank would proceed with caution on tightening rates after a likely lift-off in December.
The 50-share NSE Nifty ended down 7.30 points, or 0.09 per cent, at 7,849.25 after shuttling between 7,877.50 and 7,825.20.
"Domestic markets were plagued with volatility today, ahead of the derivatives expiry on Thursday later in the week. The India VIX registered an increase of 7.5% to 17.15 in today's trade," said Shreyash Devalkar, Fund Manager, Equities, BNP Paribas Mutual Fund.
The rupee, at 66.47, came in weaker compared to the dollar, which only added to the downbeat mood.
Investors opted to book profit in heavy-weight stocks after remaining buyers in the past two sessions.
Markets will remain closed on Wednesday on account of Guru Nanak Jayanthi. The monthly futures and options expiry is coming up on Thursday.
Metal companies felt the heat, with Hindalco and Vedanta Ltd falling up to 3.82 per cent after the BSE announced that both will shift out of the benchmark Sensex from December 21.
Gains in Hero MotoCorp, Bajaj Auto and Lupin capped the losses.
The BSE metal index was the hardest hit, down 1.21 per cent, followed by FMCG and PSU.
Persistent buying from retail investors pepped up broader markets, with the small-cap rising 0.46 per cent and the mid-cap gaining 0.36 per cent.
According to provisional exchange data, foreign portfolio investors (FPIs) sold shares worth a net Rs 94.09 crore last Friday.
Asian indices closed lower as commodity producers tracked a slide in industrial metals and crude oil. Europe fell in early trade.
US markets ended with gains last Friday led by a rally in
healthcare, consumer and technology stocks.
Pramit Brahmbhatt, Veracity Group CEO, said, "Today, local equity market traded in a thin range due to an unscheduled US Federal Reserve meeting later in the day."
In the Sensex team, 18 ended with losses.
"The market may remain cautious on account of factors like expiry, which is due on Thursday and the start of the Winter Session the same day. In the meantime, global market may remain cautious as the focus is on the Fed rate hike," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services Ltd.
The market breadth remained positive as 1,484 stocks ended higher, 1,180 finished in the red while 178 traded flat.
The total turnover declined to Rs 2,774.23 crore, from Rs 2,938.02 crore last Friday.
