Mumbai, March 11 The Sensex and Nifty benchmark indices ended nearly 2% lower on Wednesday after a day of recovery, as a surge in global crude oil prices amid rising tensions in West Asia spooked investors.
Furthermore, sustained outflows of foreign funds and selling in blue-chip bank stocks added to the pressure, traders said.
The 30-share BSE Sensex plunged 1,342.27 points or 1.72%, closing at 76,863.71. During the day, it dropped 1,446.72 points or 1.84%, closing at 76,759.26.
A total of 2,380 stocks declined, while 1,881 advanced and 153 remained unchanged on the BSE.
The 50-share NSE Nifty fell 394.75 points or 1.63%, closing at 23,866.85.
"Investor sentiment remained fragile as escalating geopolitical tensions in the Middle East continued to unsettle global markets and increase volatility," said Ajit Mishra, SVP, Research, Religare Broking Ltd. "Concerns over potential disruptions to crude oil supply, rising inflation, and the potential impact on economic growth kept participants cautious. Additionally, continued foreign institutional investor selling and weakness in the rupee further dampened risk appetite."
Bajaj Finance was the biggest drag on the Sensex, falling 5.01%, followed by Axis Bank, Bajaj Finserv, Mahindra & Mahindra, Maruti, Trent, Bharti Airtel, and Kotak Mahindra Bank.
Sun Pharma and NTPC were the only gainers.
"Markets resumed their downward trajectory after a brief rebound in the previous session, as persistent foreign fund outflows and selling in banking, financial services, and automobile stocks weighed on benchmark indices," said Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
The BSE midcap select index declined by 1.55%, and the smallcap select index declined by 0.61%.
The auto index declined by about 3% as the sector continued to face multiple headwinds, including higher raw material costs and persistent supply chain challenges, particularly semiconductor shortages affecting production, Khemka said.
Among BSE sectoral indices, auto fell 3.06%, bankex (2.06%), Private Banks index (2.03%), BSE Top 10 Banks (2.03%), financial services (1.99%), consumer discretionary (1.89%), and PSU Bank (1.87%).
In contrast, BSE energy, healthcare, utilities, oil & gas, and power were the gainers.
"Indian equity markets witnessed a sharp sell-off today as heavy profit-booking wiped out the gains from the previous bullish session, reflecting growing caution among investors amid persistent global uncertainties," said Hariprasad K, Research Analyst and Founder, Livelong Wealth. "From a market behaviour perspective, Wednesday's decline appears largely driven by systematic profit-booking after short-covering rallies, rather than fresh long-term selling. However, the magnitude of the fall indicates that traders remain reluctant to carry aggressive bullish positions in the current uncertain macro environment."
Brent crude, the global oil benchmark, jumped 5.76% to USD 92.86 per barrel.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 4,672.64 crore on Tuesday, according to exchange data. Domestic Institutional Investors (DIIs), however, bought stocks worth Rs 6,333.26 crore.
In Asian markets, Japan's Nikkei 225 index jumped 1.43% and South Korea's Kospi climbed 1.40%. Shanghai's SSE Composite index also ended in positive territory, while Hong Kong's Hang Seng index settled lower.
Markets in Europe were trading lower in mid-session deals.
The US market ended almost flat on Tuesday.
Looking ahead, markets are likely to remain cautious as investors await US and domestic inflation data and clearer macroeconomic signals before taking fresh directional bets, Vinod Nair, Head of Research, Geojit Investments Limited, said.
In the previous session, the Sensex jumped 639.82 points or 0.82%, closing at 78,205.98. The Nifty climbed 233.55 points or 0.97%, closing at 24,261.60.