Logging their worst single-day drop in over five weeks, Sensex on Monday fell 244.48 points to end at 26,816.56 and Nifty slid 63.50 points to 8,042 on losses in bluechips tracking tepid China data and US rate hike fears, even as August domestic inflation eased to nearly 5-year low.
The rupee depreciated against US dollar to 61.05, further dampening market sentiments, said equity brokers.
Selling in metal, IT, oil & gas, capital goods, banking, consumer durables, auto, PSU and FMCG stocks, dragged the down the Sensex which dipped below the 27,000-mark. There was, however, buying in healthcare stocks such Cipla and Dr Reddy.
The 30-share BSE Sensex on Monday opened in negative terrain and quickly dipped below 27,000-mark reacting to Friday's data that showed IIP growth slowed to four-month low in July.
Around noon, data showed wholesale inflation fell sharply to 3.74 per cent in August to a nearly five-year low. However, investors appeared to ignore the WPI inflation figures.
The index finally settled down by 244.48 points, or 0.90 per cent, at 26,816.56, its weakest closing since August 28.
The 244.48-point loss is Sensex's worst drop since August 8.
Devang Mehta, Sr. VP & Head - Equity Advisory, Anand Rathi Financial Services, said: "Markets were nervous on the back of tepid IIP data. Sensex and Nifty constituents continued to correct after a fast & furious rally. Frontline stocks are also in a pause mode in anticipation of clearer hints from the US Federal Reserve later this week."
Overall, 25 Sensex stocks declined while five led by Cipla, Dr Reddy's, HDFC Bank, Hero MotoCorp and Infosys rose.
The 50-issue NSE Nifty slipped below the 8,100-level by falling 63.50 points, or 0.78 per cent, to 8,042.00. The 63.50-point fall was its sharpest daily loss since August 8.
Asian markets retreated Monday after data at the weekend showed Chinese industrial output expanded in August at its slowest rate since the global financial crisis.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 182.80 crore on last Friday as per the provisional data issued by stock exchanges.
Sectorwise, the BSE Metal index suffered the most by losing 1.69 per cent, followed by Oil & Gas index (down 0.96 per cent), IT index (down 0.96 per cent), Capital Goods index (0.89 per cent) and FMCG index (0.76 per cent).
On the other hand, BSE Healthcare, Realty, Midcap and Smallcap indices ended higher.