Key share indices extended losses for the third straight day Monday on the back of disappointing Index of Industrial Production data for October.
India's October IIP contracted by 5.1% from a year earlier after a revised 2% in September, the Central Statistical Office said.
The de-growth in industrial production is the most since March 2009 when it contracted 5.2%.
The IIP data for October 2010 was 11.4 per cent.
Manufacturing output, which constitutes about 76 per cent of the industrial production, fell by an annual 6 per cent, the Statistical Office said.
The Bombay Stock Exchange's 30-share Sensex closed at 15,870 -- down 343 points.
The National Stock Exchange's 50-share S&P CNX Nifty closed down 102 points at 4,764.
"The IIP numbers are a clear indication of the fact that the slowdown has taken deep roots in the Indian economy.
Against this backdrop, I think expectations of 7% GDP growth this year would be very, very optimistic," says Jagannadham Thunuguntla, Strategist and Head of Research at SMC Global Securities.
The losses were led by index heavyweight Reliance Industries along with bank, capital goods and metal shares.
Investors would be eyeing the third advance tax numbers, due on Thursday, for direction. Further, investors are keenly awaiting Reserve Bank of India's mid-quarter monetary policy review on December 16.
Reliance Industries extended losses for the third straight session to end at Rs 728 down 3.6%.
"RIL is the counter which can drag the markets down from these levels as well, its had started to show tremendous weakness, we expect the stocks to touch near sub 700 levels in coming days.
"Its not been able to maintain above its crucial 800
Banks which are a proxy to the economy also faced the brunt of selling pressure. State Bank of India ended down 4.8%, ICICI Bank slipped3.2% and HDFC Bank dropped 3%.
Capital goods shares ended lower after the segment showed a sharp contraction of 25.5% compared with a de-growth of 6.5% in September.
Metal shares were also among the top losers. Hindalco, Tata Steel, Jindal Steel and Sterlite shed 3-6% each.
However, software shares bucked the weak trend on hopes that business environment in Europe would start improving post the European summit which concluded Friday.
At the European summit which concluded Friday, expect the United Kingdom all other countries in the European Union came to a consensus to pursue stricter budget rules for the single currency area and also to have euro zone states and others provide up to 200 billion euros in bilateral loans to the International Monetary Fund to help tackle the crisis.
Infosys gained 1% to close at Rs 2,731. TCS rose 0.7% to end at Rs1,179 and Wipro ended up 2.5% at Rs 415.
Cement shares were mostly in red in spite of posting top-line growth of 24.1% during 2QFY2012. ACC dipped 4.5% to Rs 1,112. Madras Cement, Shree Cement and Ultratech Cement dropped 3-6% each.
"The cement sector's valuations in terms of EV/sales and EV/tonne are trading ahead of the cycle when compared to utilisation levels and are almost 27% more expensive than historical valuations during periods of similar utilization levels.
But, despite low capacity utilisation, cement companies have managed to maintain relatively healthy pricing due to production discipline adopted by them, which has led to high valuations currently," Angel Broking said in a research note.
