Surrendering early gains, the benchmark BSE Sensex today tumbled by 256 points to settle below 29,000 level on sudden emergence of aggressive selling after S&P just days ahead of Budget warned that weak fiscal and low income levels "constrain" India's sovereign rating.
The index was trading in the positive terrain till late afternoon but witnessed a free fall immediately after rating agency S&P's note said India's weak fiscal and debt indicators, coupled with the low income levels, "constrain" the sovereign rating.
Bluechips like Reliance Industries, ITC, SBI, HDFC and Infosys came under intense selling pressure dragging the Sensex down to 28,975.11, down by 256.30 points or 0.88 per cent, over last close.
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The 50-share Nifty of NSE also moved down by 78.65 points or 0.89 per cent to finish at 8,754.95.
"Markets started on a weak note ahead of the crucial Budget week dragged by Oil & Gas and Banking Sectors," HBJ Capital Senior Analyst Aamir Mir said.
RIL fell the most by 2.53 per cent among the Sensex stocks. GAIL fell by 2.22 per cent and Axis Bank 2.04 percent.
HDFC, ITC, SBI and Infosys which fell up to 2 per cent were among major losers. Tata Steel, ONGC, Hindustan Unilever, Bajaj Auto and Tata Power also fell up to 1.87 per cent.
Pharma giant Lupin fell by 2.5 per cent after it said that the US Food and Drug Administration has raised concerns over production process at its Pithampur plant.
"Falling crude prices, bleak economic outlook by US Fed and relief amidst tensions over Greek economy, mixed sentiment in domestic market due to constant flow of news and events related to budget kept markets volatile," Bonanza Portfolio Associate Fund manager Hiren Dhakan said.
The stock market may remain volatile this week ahead of the expiry of futures and options February contract on coming Thursday and presentation of budget on Saturday, brokers said.