The Sensex suffered its biggest single-day rout in over four months today as investors scrambled for the exit amid a flare-up in Sino-US trade frictions. Profit-booking by participants following the recent rally on Dalal Street added to the selling pressure, brokers said.
Rate-sensitive auto, bank and realty stocks continued their slide, a day after the RBI hiked rates, making loans costlier for consumers.
The Sensex plunged 356 points to close at a one-week low of 37,165.16, while the NSE Nifty dropped 101.50 points to finish below the 10,300-mark.
Asian and European bourses tumbled after Beijing said it will retaliate if the US goes ahead with its threat of imposing higher tariffs on Chinese imports.
The RBI had on Wednesday cautioned that the rising trade tensions can escalate to a full-blown currency war, hurting global growth.
The market may consolidate 200 points below the record," said Sanjiv Bhasin, executive vice president, markets and corporate affairs at India Infoline. "Expect Nifty to climb down to 11,200-11,250 in August because of profit-booking," he said. "We should be looking at mid-cap stocks which I believe could see gains over the next few months," he added.
The 30-share Sensex, which stayed in the negative zone for the whole day, ended at 37,165.16, showing a loss of 356.46 points, or 0.95 per cent.
This is its biggest single-day fall since March 23, when it had plunged 409.73 points.
The broader Nifty too succumbed to widespread selling and hit a low of 11,234.95, before ending at 11,244.70, down 101.50 points, or 0.89 per cent.
On a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 95.94 crore, while domestic institutional investors (DIIs) offloaded equities to the tune of Rs 562.33 crore yesterday, provisional data showed.
"Weak global market on account of flare up in trade tensions between US and China coupled with RBI's caution on global currency war resulted in profit booking. As expected, US Fed kept the key rates unchanged and maintained gradual rate hike trajectory for CY18. On the other hand, fall in crude price in expectation of oversupply and better quarter results may restrict a major fall in the market. Mid and small-caps outperformed as signs of revival in earnings is likely to spread across broad indices," said Vinod Nair, Head of Research, Geojit Financial Services.
Bharti Airtel was the top Sensex loser, skidding 2.79 per cent, followed by Kotak Bank at 2.54 per cent.
Other losers included Maruti Suzuki 1.97 per cent, RIL 1.91 per cent, HDFC 1.90 per cent, Vedanta 1.83 per cent, M&M 1.81 per cent, Tata Motors 1.51 per cent, Asian Paints 1.34 per cent, HDFC Bank 1.30 per cent, TCS 1.24 per cent, L&T 1.22 per cent and YES Bank 1.16 per cent.
On the other hand, PowerGrid spurted 2.25 per cent, Coal India 1.07 per cent, HUL 0.92 per cent and IndusInd Bank 0.91 per cent, among others.
Sector-wise, the BSE telecom index declined 1.47 per cent, realty 1.45 per cent, banking 0.84 per cent, teck 0.69 per cent, IT 0.60 per cent, capital goods 0.54 per cent, FMCG 0.36 per cent and oil and gas 0.12 per cent.
However, healthcare rose 1.03 per cent, infrastructure 0.57 per cent, power 0.44 per cent, metal 0.27 per cent, consumer durables 0.24 per cent and PSU 0.16 per cent.
VK Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities said,"The Nifty surrendered 101 points to close at 11,244. While the US markets had closed mixed, it were the Asian markets that sank more on trade war fears. India has still outperformed the global indices which were mired in the red with a higher percentage of losses. We had forecast a correction in our opening note today as our target of 11,395 was almost reached yesterday at 11,390. Currency was weaker. The markets would need to consolidate before moving higher. Support exists between 11,171-11,210."
In the broader markets, the mid-cap index inched up 0.09 per cent and the small-cap rose 0.07 per cent.
In rest of Asia, Japan's Nikkei fell 1.03 per cent, Hong Kong's Hang Seng dropped 2.21 per cent and China's Shanghai Composite index lost 2 per cent.
European markets moved lower ahead of a Bank of England meeting which is expected to deliver a rate hike despite uncertainty over Brexit.
Frankfurt's DAX fell 1.66 per cent and France's Paris CAC was down 0.80 per cent. London's FTSE too fell 1.30 per cent.
US stocks closed mostly lower yesterday after the Federal Reserve left interest rates unchanged but signalled an imminent rate increase.