Sensex ended down 118.26 points at 26,599.11 mark, the lowest level since Oct 21, 2014.
Weakening of the rupee and rebound in crude oil prices further dampened sentiments.
According to analysts, high-speed trading that takes place through dynamic software programs has worsened the fall; the markets were already on the edge following the emergence of a broad selling pressure as FIIs unwound positions on MAT worries and domestic traders remained hesitant to step in due to weak corporate earnings in Q4.
The 30-share Sensex ended down 118.26 points at 26,599.11 mark, the lowest level since Oct 21, 2014.
The 50-share Nifty was down 39.70 points at 8,057.30 after breaching 8,000 mark in intra-day trade.
The broader markets underperformed the benchmark indices- BSE Midcap and Smallcap indices were down nearly 2%.
The market breadth in BSE was negative with 1,848 declines against 819 advances.
Further, overseas funds sold around a net $630 million in Indian shares and bonds on Wednesday, marking their biggest single-day sales since January 2014, reinforcing fears that an emerging market darling is losing its allure.
EXPERT OPINION
According to K.Subramanyam, Co-Head Equity Advisory, Altamount Capital, "The markets are on a strong profit taking mode after the huge rise in Nifty from 6,000 levels in Sept 2013 to 9,000 in Feb 2015.
Technically a fall upto levels of 7,200-7,500 could be expected which could be termed as a healthy correction.
However falls are to be used to gradually buy scrips which hold promise. Volatility will be high and any sharp rebounds could be used to book profits."
INDIAN RUPEE
The rupee fell to its lowest in 20 months on Thursday, weighed down by concerns over the government's taxation policies that threaten to reduce the allure of local assets for foreign institutions, while a global debt sell-off also hurt.
The partially convertible rupee was trading at 64.21 per dollar by 15:33 PM.
SECTORS & STOCKS
BSE Bankex and BSE Capital Goods index slumped by over 2% followed by counters like Healthcare, Auto, Consumer Durables, Realty and Power, all dipping by 1% each.
However, BSE IT index surged by over 1%. Banking shares continued to be under pressure, with the Bank Nifty hitting five-month lows, on the back of heavy selling by overseas investors.
The Bank Nifty slipped over 2% at 17,377 mark. ICICI Bank, HDFC Bank, Axis Bank, SBI and HDFC slipped between 1-4%.
According to the latest data released by the Reserve Bank of India (RBI), the banking sector's asset quality woes further worsened in the last one year, with gross non-performing asset (GNPA) ratio inching to 4.45 per cent as on March 15 this year, as compared to 4.1% in March 2014.
Further, the Reserve Bank may cut rate by 25 basis point even before its monetary policy review on June 2 as inflation is easing and the US Fed tightening is expected by year end, SBI said in a research note today Other notable losers were ONGC, Maruti Suzuki, Hindalco, Tata Power, Dr Reddy’s Labs and RIL.
Shares of information technology (IT) companies ended higher in otherwise subdued market after the rupee weakened.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
Tata Consultancy Services (TCS), Infosys, HCL Technologies, CMC, MindTree and Polaris Consulting & Services were up 1%-3% on the NSE.
Shares of Hero Motocorp ended the session 1.2% higher ahead of its quarterly results due later during the day.
Among other shares, MEP Infrastructure Developers has dipped 12% to Rs 53.75 on the BSE, extending its previous day’s fall, after Credit Suisse (Singapore) sold more than half of its holding in the company through the open market.
Jet Airways slipped 9% to Rs 344 on the BSE on back of heavy volumes.
GLOBAL MARKETS
World financial markets were unsettled again on Thursday as a week-long sell-off in benchmark government bonds, stocks and the dollar, and a race up in oil prices, was compounded by UK election uncertainty.
Nerves were still jangling in Europe and shares and bonds got off to another poor start on fears the recent surge in yields, the euro and energy costs could snuff out the only recently-formed hopes of a solid euro zone recovery.
Photograph: PTI