The Sensex on Wednesday gave up its gains and closed 121 points lower on fears that the Reserve Bank of India (RBI) could hike rates further after data showed November headline inflation was still above 9 per cent.
The figure, at 9.11 per cent, was more than what policymakers and analysts expected.
HOW THE MARKETS FARED
The 30-scrip index of the Bombay Stock Exchange (BSE) closed at 15,873.29 points, 121.37 points, or 0.76 per cent, down from its previous close at 16,002.51 points.
The Sensex had fallen to an intra-day low of 15,855.12 points.
Concerns about a depreciating rupee, which fell to a new low of 53.75 to a dollar, continued to worry investors. The currency has been under downward pressure for more than four months as foreign funds went bearish on Indian equities markets and as demand for the greenback from importers increased.
The gloomy outlook for the global economy owing mainly to the debt crisis in eurozone also added to the Indian currency's depreciation.
The 50-scrip S&P CNX Nifty of the National Stock Exchange also ended lower at 4,763.25 points, down 0.78 per cent or 37.35 points from its previous close.
Broader markets ended in the red as well, with the BSE 500 index closing 0.86 per cent down. The BSE midcap and smallcap indices also gave up their gains and closed 0.95 per cent and 0.81 per cent lower.
The market breadth was negative, with 1,080 stocks advancing and 1,626 on the decline. Another 160 were unchanged.
Among gainers on the 30 scrip Sensex were: Sun Pharma, up 1.68 per cent at Rs 519.90; ITC, up 1.17 per cent at Rs 199.65; Bharti Airtel, up 0.71 per cent at Rs 348.85; and Jaiprakash Associates, up 0.25 per cent at Rs 60.65.
Prominent losers included: Tata Power, down 3.98 per cent at Rs 86.90; DLF, down 3.94 per cent at Rs 376.50; DLF, down 3.58 per cent at Rs 200.85; and Coal India, down 2.76 per cent at Rs 299.90.
According to data available with the Securities and Exchange Board of India (Sebi), foreign institutional investors sold scrips worth $91.66 million on Wednesday.
Asian markets slipped as traders remained unconvinced by Europe's deal to save their currency and were upset by the US Fed's lack of fresh economy-boosting plans. Overnight losses at Wall Street also weighed on sentiments.
The Japanese Nikkei closed 0.39 per cent down at 8,519.31 points. Hong Kong's Hang Seng shed 0.5 per cent and ended at 18,354.43 points. The Chinese Shanghai composite index closed 0.89 per cent lower at 2,228.53 points.
- With IANS inputs