Despite making a higher opening, markets closed lower amid volatile trades on account of profit booking among index heavyweights at higher levels. Prospects of early interest rate hike by the US Federal Reserve in June and slip in crude oil prices further hurt sentiments.
However, stellar rally in ITC shares along with strength in the Asian equities capped the downside.
Going ahead, volatility is to be seen on the bourses as traders roll over positions in the futures & options segment from the near-month May series to June series due on Thursday.
The S&P BSE Sensex slipped 72 points to end at 25,230 and the Nifty50 dropped 19 points at 7,731.
Among broader markets, BSE Midcap and Smallcap indices ended lower between 0.3%-0.4%.
“Nifty50 needs time to correct the entire rise from 6,825 to 7,991 which unfolded itself in 36 trading days.
"The current correction has just lasted for 16 days. Counting 38% retracement of the entire rise, the Nifty50 is expected to find strong support at 7,500 levels wherein traders can initiate long positional trades.
Investors should continue to accumulate good quality shares while traders wanting to go long may wait on the sidelines for some more time,” said Jimeet Modi, CEO, SAMCO Securities.
Among overseas market, Asian shares rose on Monday after a solid session on Wall Street, while the dollar moved away from recent highs though remained supported as investors bet that the US Federal Reserve was on track to raise rates sooner rather than later.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6%, after US shares rallied on Friday, shrugging off growing expectations of further tightening in monetary policy.
But Japan's Nikkei stock index ended down 0.5% on worrying economic data and reports that Japan's sales tax increase would be implemented after all, quashing hopes of a delay.
Oil prices slipped in Asian trade on Monday on a strong dollar and signs that global crude supply is holding up even as volumes hit by unplanned outages rise to at least five-year highs.
Back home, Reserve Bank of India Governor Raghuram Rajan said in a speech on Saturday that with a view to limit external vulnerabilities arising from the easy and unconventional monetary policy in industrial countries, India is taking measures to control capital inflows, intervening in the foreign exchange market as a macro prudential measure to reduce volatility and maintaining sufficient foreign exchange reserves to be able to withstand a sudden stop in capital inflows.
The rupee recovered 19 paise to 67.25 against the dollar in early trade today on increased selling of the US currency by exporters and banks amid a higher opening in the domestic stock market.
Among key stocks, BPCL and Tata Power Company will announce Q4 results today.
ITC rallied 5%, extending its Friday’s 1.5% gain on the BSE after reporting a better-than-expected performance for the quarter ended March 31, 2016 (Q4FY16).
ITC had declared a bonus issue of one share for every two shares held and has declared a final dividend of Rs 8.5 per share (including a special dividend of Rs 2 per share) for the current fiscal.
BHEL edged lower and Power Grid Corporation of India gained after the Bombay Stock Exchange (BSE) announced changes in the constituents of its indices as part a semi-annual reconstitution of the indices.
BHEL was off 0.6% and Power Grid Corporation of India rose around 3%. Power Grid Corporation of India will replace BHEL in Sensex with effect from June 20, 2016.
Management buyout firm Excalibur and Indian-origin businessman Sanjeev Gupta’s Liberty House, the two front-runners in the race to acquire Tata Steel’s UK assets, are believed to be considering joining forces, it was reported on Sunday. Tata Steel fell over 3%.
Drug maker Lupin’s stock extended Friday's losses by 3% due to concerns over the US Food and Drug Administration (FDA)’s observations on its Goa plant and the likely impact on its earnings owing to a rise in expenses in FY17.
ONGC ended lower by 2% as it faces a repeat of the Krishna Godavari (KG) basin fiasco in Iran, as lengthy negotiations on terms may drive it to a point where its discovered gas reserves in Farzad-B field in the Persian Gulf may be drawn out by neighboring Saudi Arabia.
Among other shares, Multi Commodity Exchange of India (MCX) ended higher by 7% after the company announced that the RBI withdrawn the restrictions placed on purchase of the company's shares by foreign institutional investors (FIIs) and registered foreign portfolio investors (RPFIs) with immediate effect.
Manappuram Finance soared 9%, after hitting its fresh 52-week high on the BSE, on back of heavy volume.
Somany Ceramics moved higher by 11%, to touch its 52-week high of Rs 495 in intra-day trades, after reporting a strong 76% year on year (YoY) growth in net profit at Rs 26 crore for the quarter ended March 31, 2016 (Q4FY16).
Britannia Industries dipped 8% after the company reported a lower-than-expected 13.8% year on year (YoY) growth in net profit of Rs 190 crore for the quarter ended March 31, 2016 (Q4FY16), on the back of a single digit growth in revenues.
TTK Prestige has surged 6% after reporting over 100% rise in March quarter net profit at Rs 21.62 crore, on the back of strong operational performance.
