The benchmark indices dropped sharply in early trade today. Asian markets also plunged following an overnight slump on Wall Street.
The Sensex was trading at 14,678, down 197 points. The Nifty fell 1 per cent to 4,435.
The markets are expected to correct sharply. The support for the Nifty is seen at 4,360, said Anu Jain, VP, IIFL Wealth Mgmt, India Infoline.
Barring defensives like pharma and FMCG stocks, selling pressure was seen in most sectors. The BSE metal index was down 2.7 per cent and the realty index fell 2.6 per cent. The capital goods index on the BSE dropped 1.9 per cent.
The key driver for markets has been fund flows. However, PE multiples are looking stretched at this stage, said Tarun Sisodia, Head of Research, Anand Rathi Sec. He further said that the markets are likely to consolidate in the next 2-3 months.
Among the Sensex stocks, Sterlite Industries was the biggest losers, down over 5 per cent. Tata Steel, Bharti Airtel and HDFC were the other main losers in the pack.
RIL was also trading lower in early deals. The stock was down 0.6 per cent.
RIL has a support at 2,130 levels. However, if this level breaks then it may tumble down to 1,980, said Anu Jain.
On Wall Street, bad economic news and doubts about the market's ability to rally dealt stocks a huge setback. The Dow Jones industrials fell 187 points on Monday, their biggest drop since April 20. All the major market indexes fell more than 2 per cent. The broader Standard & Poor's 500 index fell 22.49, or 2.4 percent, to 923.72, and the Nasdaq composite index fell 42.42, or 2.3 per cent, to 1,816.38.
Asian markets were trading sharply lower today. Hong Kongs Hang Seng and Japans Nikkei 225 have plunged over 2.5 per cent each. South Koreas Kospi has also slipped by 1 per cent.