Having fallen by more than a fifth this year, Sensex among the worst performing indices globally.
A sharper-than-expected fall in the October industrial output compounded investor concerns, pulling the stock markets down to their two-week low on Monday. The Bombay Stock Exchange benchmark, Sensex, fell 343 points, or 2.1 per cent, to close at 15,870, its lowest closing since November 25. The broader S&P CNX Nifty fell 102 points, or 2.1 per cent, to close at 4,764. Indian shares have fallen more than a fifth this year and are among the worst performers globally.
According to provisional data, while foreign institutional investors sold stocks worth Rs 428 crore, domestic funds bought stocks worth Rs 166 crore.
There was greater pressure on banking stocks, which rose last week on expectations the Reserve Bank of India (RBI) would cut the cash reserve ratio.
Industrial output fell for the first time in more than two years in October, as waning consumer demand took a toll. Last week, from its original estimate of nine per cent, India sharply cut its economic growth forecast for the current financial year to 7.25-7.75 per cent.
Japanese research firm Nomura expects RBI to keep interest rates unchanged to contain inflation.
From a policy perspective, though economic activity is likely to weaken in the months ahead, we believe inflation will remain RBIs primary concern. As we expect core inflation to remain high in November, we think the RBI will stay on hold at its December 16 meeting, said Nomura in a report.
State Bank of India, the countrys largest public sector bank, fell 4.9 per cent to Rs 1,773. ICICI bank, the largest private sector lender, was down 3.3 per cent to Rs 707. The BSE banking index fell 2.3 per cent.
Reliance Industries, which has the heaviest weight on the benchmark index, led the losses and closed 3.7 per cent lower at Rs 727.5. While Tata Motors fell 3.09 per cent, Maruti Suzuki was down 2.8 per cent. High interest rates and fuel prices have chipped away demand for vehicles, weighing on automakers shares.
The mood is changing for the worse, said Arun Kejriwal, strategist at research firm KRIS, adding that signs from both domestic and global economies were not encouraging.
The rupee depreciated sharply by more than a per cent against the dollar on Monday, adding to market nervousness. It plunged to a record low, following a sharp correction in the stock exchanges and demand from importers. The rupee stood at 52.7, down 0.65 paise, or 1.25 per cent, against the previous close of 52.03 a dollar.
AT TWO-WEEK LOW
Top 5 Sensex losers
Top 5 sectoral losers on BSE
Oil & Gas
*Over previous close Compiled by BS Research Bureau
Information technology stocks would benefit from rupee deprecation. Wipro (up 2.6 per cent), Infosys Technologies (up 0.9 per cent) and TCS (up 0.7 per cent) were the only index gainers.
The BSE Mid-cap and Small-cap indices were down 1.9 per cent and 1.54 per cent, respectively. Among sectoral indices, the BSE Metal Index fell 4.14 per cent, BSE Bankex was down 2.3 per cent, BSE Oil & Gas Index declined 2.8 per cent and BSE Realty Index moved 2.7 per cent lower. The BSE IT Index was up 0.95 per cent.
Essar shares plunged after the Central Bureau of Investigation filed chargesheets against company directors Ravi Ruia, Anshuman Ruia and Vikash Saraf in the 2G spectrum scam. Kiran Khaitan, sister of Essar group founders and promoters Shashi and Ravi Ruia, and her husband, I P Khaitan, have also been named. Essar Oil was down 10.9 per cent, Essar Shipping fell 9.7 per cent and Essar Ports dipped 7.7 per cent.
In Europe, the markets witnessed risk aversion after ratings agency Moodys gave downgrade warnings about some euro zone economies. FTSE 100 was down 0.7 per cent, CAC 40 fell 0.9 per cent and DAX was 1.6 per cent lower.
Weekend Chinese data showed the countrys November exports dropped to their lowest level since December 2009. Demand for Chinese goods shrank on the US and Europe debt crisis. While November exports increased 13.8 per cent from a year ago to $174.46 billion, the imports growth slowed to 22.1 per cent at 159.96 billion yuan from 28.7 per cent in October. The trade surplus narrowed to $14.52 billion from $17.03 billion the previous month.
The Shanghai Composite index was down 1.02 per cent at 2,291, a level not seen since March 2009. While the Nikkei gained 1.4 per cent, Hang Seng was down 0.06 per cent.