The market showed its unpredictable side again as the flagship Sensex reversed two days of gains and dived about 232 points to close at 26,515 today, pulled down by dismal factory output data and higher oil prices amid mixed Asian indicators.
The nervousness was palpable as investors looked forward to the release of CPI inflation, to be released on Tuesday. Wholesale inflation is due on Wednesday.
The broader NSE Nifty cut a sorry figure too, which cracked below the 8,200-mark.
Sentiment soured as IT stocks were hit hard by some blunt talk from US President-elect Donald Trump on visas while state-owned oil marketing companies declined after crude prices shot up to their highest since mid-2015.
Globally, oil prices soared today following a landmark deal by Russia and other non-OPEC producers to join the Organisation of Petroleum Exporting Countries (OPEC) in capping output in a bid to curb oversupply that has hammered prices down.
Benchmark Brent for February contracts went up USD 2.41 to USD 56.74 per barrel in Asian trade. A higher oil price means more cost outgo for Indian oil companies.
The move marks the first time non-OPEC members have struck a deal since 2001 and follows a similar agreement by OPEC last month.
The Sensex stayed in the negative zone throughout the day and touched a low of 26,468.59 before ending lower by 231.94 points, or 0.87 per cent, at 26,515.24. The index had gained 510.31 points in the previous two sessions.
The 50-share NSE Nifty slipped below the 8,200-mark to touch a low of 8,154.45, but settled at 8,170.80, down 90.95 points, or 1.10 per cent.
The forex market was closed for a holiday.
Data on Friday showed that industrial output slipped into the negative zone again with a contraction of 1.9 per cent in October, mainly due to a sharp decline in production of capital goods and poor show of the manufacturing sector.
Infosys fell as much as 1 per cent while Wipro shed 0.72 per cent, but TCS inched up 0.58 per cent. Shares of the fuel retailers such as HPCL, BPCL and IOC faced selling pressure and slumped by up to 4.25 per cent.
To reverse a dramatic fall in income, Russia and 10 other non-OPEC states on Saturday said they will reduce their production by more than half a million barrels per day (bpd).
Asian Paints emerged as the top loser among the Sensex constituents by diving 3.33 per cent followed by Axis Bank at 2.56 per cent. Other big losers included Bajaj Auto 2.52 per cent, Hero MotoCorp (2.29 per cent), Tata Motors (2.05 per cent), M&M (1.77 per cent) and Maruti Suzuki (1.54 per cent).
In terms of sectors, auto fell the most by declining 1.73 per cent followed by banking 1.67 per cent, FMCG 1.20 per cent and oil and gas 1.14 per cent.
Mid-cap and small-cap indices fell 1.11 per cent and 0.73 per cent, respectively, as investors trimmed their exposure to book profits.
Meanwhile, foreign funds bought shares net worth Rs 200.52 crore last Friday, as per the provisional data.
In rest of Asia, Hong Kong's Hang Seng tumbled 1.44 per cent as investors look ahead to an expected US interest rate hike later this week. China Shanghai Composite Index fell 2.47 per cent while Japan's Nikkei surged 0.84 per cent, helped by weakness in the yen against the American currency.
European markets, however, were in a better shape. London's FTSE rose 0.22 per cent, Paris gained 0.17 per cent while Frankfurt's DAX shed 0.17 per cent.
Of the 30-share Sensex pack, 23 scrips ended lower.
In addition to the uncertainties surrounding the impact of
demonetisation, investors were concerned about a possible interest rate hike by the US Federal Reserve as the key meeting kicks off tomorrow.
"The market plunged due to a spurt in oil prices and its impact on India's inflation band, which has elevated the pressure on equities," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.
"The focus remains on US economic outlook and inflation, though investors are likely to view the event in conjunction with the policy stance of the newly-elected US President."
However, ONGC rose 1.43 per cent, followed by NTPC 0.82 per cent and TCS 0.58 per cent.
The market breadth turned negative as 1,533 stocks ended lower, 1,097 closed higher while 148 ruled steady.
The total turnover on BSE came in at Rs 2,102.26 crore, lower than Rs 2,399.56 crore during the previous trading session.