The Sensex and Nifty ended the session down by nearly 1 per cent owing to sustained foreign fund outflows and persistent concerns over US-North Korea tug-of-war. Profit-booking at higher levels also dampened the domestic sentiment.
The 30-share BSE index Sensex ended lower by 295.81 points or 0.93 per cent at 31,626.63 and the 50-share NSE index Nifty closed down by 91.8 points or 0.92 per cent at 9,872.60.
The benchmark BSE Sensex touched a high of 32,016.52 and a low of 31,474.56.
All BSE sectoral indices ended in the negative zone. Among them,
Major Sensex losers were Adani Ports (-3.29%), Kotak Bank (-2.24%), Lupin (-2.2%), Tata Steel (-2.2%) and ITC (-2.18%), while the major gainers were Coal India (+1.2%), ICICI Bank (+0.87%), HUL (+0.55%), Reliance (+0.36%) and TCS (+0.23%).
The Nifty PSU Bank index was down for a third straight session, sliding as much as 2.8 per cent. Andhra Bank and Canara Bank Ltd lost more than 2 per cent each.
Tata Steel Ltd was among the top percentage losers on the index, plunging as much as 4 per cent and pushing the Nifty Metal index lower.
Brokerage reaction
“It's a clear case of correction out there with investors taking a more cautious approach in the near term,” said Siddhartha Khemka, Head of research - Equity, Centrum Wealth.
Investors were also worried over OECD growth forecast. Last week, OECD had slashed India's growth forecast for this financial year to 6.7 per cent from 7.3 per cent estimated in June, citing transitory impact of GST rollout and demonetisation.
Meanwhile, FIIs have sold domestic stocks worth $2.66 billion between August 1 and the third week of September, making it the biggest pullout of any major emerging market. The outflows exceeded those from major emerging markets such as South Korea, Taiwan, Indonesia and South Africa.
Domestic sentiment was hit as exchange of insults between US President Donald Trump and North Korea heated up, sapping broader risk appetite. US Fed’s hawkish monetary policy stance and the decision to begin its balance sheet reduction programme in October 2017 too weighed on the sentiment.
At the domestic front, fears of combined fiscal slippage due to the state farm loan waivers, uncertainty in achieving budget revenue targets, sharp depreciation in the rupee over the past two weeks and spike in bond yields, rise in current account deficit, slowing GDP growth and stretched valuation are other factors which hit the equity markets.
Asian shares
MSCI's broadest index of Asia-Pacific shares outside Japan handed back earlier modest gains and was last down 0.35 percent with losses across the regions weighing.
Chinese stocks remained shaky after falling towards the end of last week following the Federal Reserve's hawkish policy stance and S&P's downgrade of China's sovereign rating.
Hong Kong's Hang Seng was down 0.8 per cent and Shanghai slipped 0.3 per cent after a number of Chinese cities rolled out new cubs to further slow home property sales.
South Korea's KOSPI shed 0.4 per cent, while Japan's Nikkei bucked the trend and rose 0.6 per cent thanks to the yen's weakening against the dollar.
The S&P 500 and Nasdaq had closed slightly higher on Friday as worries about the Graham-Cassidy proposal to reform US health insurance eased and investors shrugged off concerns about North Korea.