Weak global cues coupled with the possibility of a surge in oil prices, dampened sentiment on Wednesday, snapping the two-day winning streak of benchmark indices. Reports that the talks between government and Left over the ongoing nuclear issue have been postponed, also played spoilsport.

Market players expect further pain as some of the biggest US corporates like Morgan Stanley and FedEx have come out with disappointing numbers. Any slowdown in the worlds largest economy is bound to have a cascading impact on other countries including India. Dow Jones lost more than 50 points in the first few minutes of the trading session on Wednesday, after shedding more than 100 points on Tuesday.

Nymex crude futures gained close to 1% at $135.08. Interestingly, FedEx reported a fourth quarter loss apart from a gloomy outlook for its shipping business clearly showing that higher fuel prices were eating into profits. Agency reports also said that the quarterly earnings of Morgan Stanley dropped by more than 50% due to trading losses and a slowdown in investment banking. This, despite $1.43 billion of pretax gains from asset sales.

Closer home, the 30-share Sensex lost 274.59 points to close at 15,422.31. The broader S&P CNX Nifty settled the day at 4,582.40, down 70.60 points. On BSE, declines at 1,402 marginally outnumbered 1,254 gainers. Most of the sectoral indices also lost in the range of 1-3% each. According to provisional figures, FIIs net sold Indian equities worth Rs 435 crore.

Market players also seem to be worried over inflation numbers that many believe could touch double digits in the coming months. Indias inflation is already at a seven year high at 8.75%, fuelling expectations of a further hike in interest rate thereby affecting growth. Incidentally, the ongoing friction between the government and Left parties is likely to slowdown the pace of economic decisions.

According to reports, the Left has asked the government not to seek approval of the India-specific safeguard agreement with the International Atomic Energy Agency (IAEA). Earlier in the day, a meeting between the Left leaders and the government was postponed with the Left saying that they were not given a copy of the draft safeguards agreement with the IAEA and as such not in a position to form an opinion.

Meanwhile, the GDR market ended in negative territory, despite opening on an optimistic note. The Skindia GDR Index was down 0.22% at 5 pm IST. GDRs of companies like ITC, Gail and Reliance Industries are trading at a discount to domestic prices that could result in arbitrageurs pushing the prices of these companies lower in the local markets over the next few days.