The Sensex and the Nifty ended nearly half a per cent lower, giving up gains of the previous two sessions, and tracking declines around the region after lacklustre Chinese economic data added to heightened worries about the global economy.
The 30-share BSE index Sensex ended lower by 97.41 points or 0.38 per cent at 25,622.17 and the 50-share NSE index Nifty ended down by 30.5 points or 0.39 per cent at 7,788.10.
Among BSE sectoral indices, consumer durables index fell the most by 1.76 per cent, followed by TECk 0.79 per cent, metal 0.77 per cent and PSU 0.76 per cent. On the other hand, capital goods index was up 0.92 per cent, followed by auto 0.7 per cent and FMCG 0.02 per cent.
Top five Sensex losers were Hindalco (-2.61%), HDFC (-1.89%), ONGC (-1.71%), SBIN (-1.71%) and Wipro (-1.71%), while the major gainers were Tata Motors (+2.71%), BHEL (+1.74%), Bajaj Auto (+1.47%), L&T (+1.31%) and ICICI Bank (+1.15%).
China consumer inflation
Data earlier showed that China's consumer inflation in August edged up more than expected from a year earlier, but producer prices fell for the 42nd straight month, signalling the risk of deflation.
"The major concern right now is spillover of volatility. China and the United States, both are weak and the volatility factor which is affecting them will have a correlation with this," Alex Mathews, head of research at Geojit BNP Paribas, said.
"Globally speaking, a lot of investors are reducing their bets on equities because corrections can extend somewhat."
Early trade
The Sensex tumbled over 400 points and the NSE Nifty fell below 7,700-mark in early trade as investors preferred to book profits after a two-session rally on worries over likely delay in Goods and Services Tax.
After resuming lower at at 25,522.96, the Sensex moved in a range of 25,287.50 and 25,733.70 before ending down by 97.41 points or 0.38 per cent at 25,622.17.
Brokers' comment
Brokers said besides profit-booking by speculators and sustained capital outflows by foreign funds, domestic sentiment was also dampened by the delay in implementation of the key GST law after the government yesterday gave up plans to reconvene the monsoon session of Parliament.
The government had kept the session alive on hopes of building a consensus on GST, which has been billed as one of the biggest economic reforms.
Meanwhile, foreign investors sold shares worth Rs 452.13 crore yesterday, as per the provisional data.
According to analysts, an interest rate hike in the US could accelerate the selling from foreign investors who would like to park their money in US bonds. Besides, a rate hike in the US would strengthen the dollar, putting further pressure on rupee.
Analysts were also concerned about the relentless selling from foreign investors in the domestic stock markets. Foreign investors sold a record Rs 16,877 crore worth of domestic stocks in August. They had sold stocks worth nearly Rs 6,000 crore in the past seven sessions.
Global markets
European shares retreated on Thursday, tracking sharp losses on Wall Street and in Asia, after the latest Chinese data signalled that deflation remained a significant risk for the world’s second-largest economy.
China’s manufacturers slashed prices at the fastest rate in six years in August as commodity prices fell and demand cooled. The producer price index fell 5.9 per cent in August from the same period last year, its 42nd consecutive month of decline.
Asian stocks fell on Thursday after US stocks retreated overnight and as Japan machinery orders unexpectedly shrank, deflating investors' appetite for riskier assets.
The two-day rally in global markets cooled off today amid fresh concerns about global growth, particularly China's economy.
China's producer prices fell for the 42nd straight month in the latest sign that deflation remains a significant risk for the world's second-largest economy.
A report by SMC Global said: "Asian stocks fell today after .. stocks retreated overnight and as Japan machinery orders unexpectedly shrank, deflating investors' appetite for riskier assets. Consumer prices in China were up 2.0 per cent on year in August. That exceeded forecasts for an increase of 1.8 per cent and was up from 1.6 per cent in July. On a monthly basis, consumer prices climbed 0.5 per cent versus forecasts for 0.4 per cent after gaining 0.3 per cent a month earlier. Producer prices tumbled an annual 5.9 percent versus forecasts for a decline of 5.6 percent following the 5.4 per cent contraction in July."