Indian shares fell nearly 2 per cent, as selling by foreign investors continued amid worries that a likely weak monsoon may delay key reforms and further cut in borrowing costs.
The broader NSE index broke the psychologically important 8,000 level intraday for the first time in over a month.
Stocks gave up gains made in the previous session after index compiler MSCI Inc delayed the inclusion of Chinese domestic shares in its emerging markets index, keeping India and other markets' weightage intact in the index.
Investors are concerned that a weak monsoon may delay further interest rate cuts by the central bank and even make the government take populist measures or at least delay key reforms, including the one on land acquisition that is before Parliament.
FII selling
Overseas investors have sold nearly $112 million worth of cash shares in June so far, adding to the $902.38-million worth shares sold in the previous month, depository and exchange data showed, amid worries over slow reforms and retrospective taxes.
"Falls are surprising if one looks at the strong internals of Indian economy. Foreign sales should abate as reforms pick up," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.
The 30-share BSE index Sensex plunged 469.52 points or 1.75 per cent to 26,370.98 and the 50-share NSE index Nifty dropped 159.1 points or 1.96 per cent to 7,965.35.
All BSE sectoral indices ended in the red. Among them, banking index fell the most by 2.37 per cent, followed by auto 2.37 per cent, power 2.31 per cent and consumer durables 2.03 per cent.
Top five Sensex losers were Tata Power (-4.88%), Tata Motors (-3.61%), BHEL (-3.24%), Reliance (-3.17%) and Axis Bank (-3.1%), while the sole gainer was VEDL (+1.54%).
Shares on NBCC up 2% - plans to redevelop area around New Delhi railway station through a JV with a Malaysian firm
— Meera Siva (@siva_meera)
June 11, 2015A report by SMC Investments and Advisors said: "Asian stocks climbed a second day amid optimism Greece will forge a debt deal, while Japanese debt paced a retreat in Treasuries. US stocks jumped overnight, helped by gains in technology and financial shares. Wall Street had suffered through much of the week, weighed by concerns that the Federal Reserve would hike rates sooner rather than later, and fears its financial saga would see Greece defaulting on its debt. China's central bank on Wednesday sharply cut the inflation projection for the year and lowered the growth forecast slightly as it expects the government measures to underpin the momentum. The People's Bank of China lowered the inflation forecast to 1.4 per cent from 2.2 per cent seen earlier. The growth forecast was reduced to 7 per cent from 7.1 per cent.''
Global markets
European shares steadied in early trading on Thursday after a strong rally in the previous session, with the lack of any concrete progress related to Greek debt negotiations prompting investors to avoid strong bets.
The pan-European FTSEurofirst 300 index was up 0.07 per cent at 1,549.91 points by 0715 GMT after surging 1.7 per cent in the previous session.
Asian stocks rose on Thursday, encouraged by gains on Wall Street, while the New Zealand dollar tumbled to a five-year low after the central bank cut interest rates for the first time in four years as the economy slows.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 per cent.
Tokyo’s Nikkei added 1.5 per cent, while Australian shares gained 1.2 per cent and South Korea’s Kospi advanced 0.5 per cent. The Shanghai Composite Index bucked the trend and lost 0.3 per cent.