Indian shares extended declines for a third straight day on Thursday, tracking a fall in global peers after Fitch downgraded the U.S. credit rating, with analysts expecting further consolidation in domestic equities.
The Nifty 50 fell 0.74% to 19,381.65, while the S&P BSE Sensex settled 0.82% lower to 65,240.68.
Financials lost 1.17%, leading declines on the Nifty, while banks and IT fell 1.07% and 0.24%, respectively.
Broader markets, however, remained resilient, reversing intraday losses. The domestically-focused midcaps and smallcaps closed 0.12% and 0.25%, higher respectively.
Asian and European equities fell on Thursday, after Fitch downgraded the United States' credit rating to AA+ from AAA-, citing fiscal deterioration.
"While India's macro story looks intact, with record goods and services tax (GST) collections in July and expansion in the services sector, the dampening of global sentiment has triggered significant foreign selling over the last few sessions," said Anita Gandhi, director at Arihant Capital Markets.
"Expect Nifty 50 to witness further consolidation with support at 19,100-19,300 levels."
Morgan Stanley, meanwhile, upgraded its view on Indian markets to "overweight" from "equal weight", citing supportive foreign inflows, macro stability and a positive earnings outlook.
"Indian equities will (see) an effect for a day or so (from the Fitch downgrade), but the Nifty 50 will again go back to breach that 20,000 mark," said Sanjiv Bhasin, director of IIFL Securities.
"Whether we will sustain it or not is difficult to guess."
Vedanta lost 6.65%, hitting a near one-year low on reports of top shareholder Twin Star Holdings selling a 4.3% stake in the company.
Titan Company fell 2.52% and was the top Nifty 50 loser on concerns over margins after the jewellery maker reported a slide in June-quarter profit.