Shares fell on Tuesday, a day after hitting a six-week high, dragged down by pharma stocks with Lupin hurting the most, and as Asian equities languished after the Bank of Japan offered a bleaker view of the country's economy.
Up next, the market will closely watch the outcome of the U.S. Federal Reserve's two-day policy meeting, beginning on Tuesday.
The 30-share gauge after opening a shade higher, advanced to touch a high of 24,840.77 at the outset before profit-booking in recent gainers took hold, which pulled it down to a low of 24,517.28 and settled at 24,551.17, showing a loss of 253.11 points or 1.02 per cent. The gauge had gained 180.94 points in the previous two sessions.
Some weakness in the rupee too weighed on the sentiment.
The 50-share NSE Nifty broke below the crucial 7,500 level and settled lower by 78.15 points or 1.04 per cent at 7,460.60. Intra—day, it shuttled between 7,545.20 and 7,452.80.
Of the 30-share Sensex pack, 22 ended with losses while NTPC ended flat at Rs 127.30.
Shares of Lupin melted the most, falling 7.59 per cent to Rs 1,726.60 after the company received nine observations relating to inadequacy and adherence to operating norms for its manufacturing plant in Goa from the US Food and Drug Administration.
Another pharma firm Pfizer continued to remain under pressure and fell by 3.15 per cent to Rs 1,705.30 amid concerns over ban on their popular drug products.
SBI was up 1.8 per cent at Rs 185.25 on the Sensex and was the top performer during the session. It was followed by Tata Steel (+1.18%, Rs 299.80), Bharti Airtel (+1.06%, Rs 344.50), Axis Bank (+0.77%, Rs 419.15), BHEL (0.52%, Rs 106.15) and Maruti (0.28%, Rs 3,659.70).
Among the gainers were oil retailers such as BPCL and HPCL, which rose 1.08 per cent and 2.48 per cent, respectively, after Credit Suisse said it believed refining margins would remain strong as demand-supply tightens.
IDBI Bank gained 1.17 per cent on a report that the Indian law enforcement agency has not found evidence of the state-run lender's bankers being involved in money laundering.
Sectoral movers
Sectorally, BSE healthcare index took the biggest knock, falling 3.01 per cent, followed by FMCG 1.54 per cent, teck 0.93 per cent, IT 0.85 per cent, auto 0.70 per cent, capital goods 0.22 per cent, power 0.19 per cent and realty 0.09 per cent.
In line with the overall trend, the broader markets also witnessed selling, with the mid—cap index declining 0.79 per cent and small—cap shedding 0.62 per cent.
Foreign investors bought shares worth a net Rs 1,035.63 crore yesterday, as per provisional data.
BoJ policy
The BOJ held policy steady as expected and said the country's exports and production have been sluggish due mainly to the effects of slowing emerging markets growth, a slightly bleaker view than the one it gave in January.
With the global economy slowing and many countries facing deflationary pressures, investors' focus remain squarely on policy decisions from major central banks.
"The market is waiting to see the Fed commentary and if at all there is any decision on the rates. If it becomes too hawkish, then that could have an impact on the market," said Dipen Shah, senior vice-president at Kotak Securities.
Inflation
Data late on Monday showed India's inflation eased more-than-expected in February, which leaves the door open for the central bank to cut repo rates at its meeting on April 5.
"There is a probability that the decision might come some time before the policy. But I think since its an annual policy, the governor may take the opportunity to cut rates and give guidance for the next year," said Shah.
Global markets
European shares fell on Tuesday, mirroring declines in Asia after the Bank of Japan painted a bleaker picture of the Japanese economy and helped push the yen higher, and as oil prices dropped again.
The BOJ left policy on hold, as expected. Investors' attention now turns to a two-day meeting of the U.S. Federal Reserve's rate-setters, who are likely to signal a slower pace of interest rate hikes than forecast after they raised the cost of borrowing in December for the first time in nearly a decade.
The BOJ, like the European Central Bank, has resorted to negative rates in an effort to spur growth and inflation.
The Fed signalled in its "dot plot" charts of the possible path of interest rates after its December hike that it could raise rates four more times this year. Economists say this could be reduced to three or even two.
Recent data has suggested the U.S. economy is growing stronger, however, with fears of a return to recession much diminished compared with earlier this year.
"The Fed meeting is important because ... there is a risk of a hawkish statement," RIA Capital Markets bond strategist Nick Stamenkovic said. "Investors will wait for the statement and the dot plots before taking new positions."
The pan-European FTSEurofirst 300 stocks index fell 0.9 per cent, led lower by commodity-related stocks. The STOXX Europe 600 Basic Resources index was down 4.3 per cent.