Sensex, Nifty fall 1.6% as stimulus hope fades; small-caps bleed

Most investors were expecting the government to increase spending to shore up economic growth

The equity markets fell sharply on Thursday, with the broader market indices closing at three-year lows, as investors dumped shares after comments by top government officials dashed hopes of a big-bang stimulus to revive growth. 

The benchmark Sensex and Nifty indices dropped 1.6 per cent, while the index of smallcap companies plunged about 3 per cent. The Sensex dropped nearly 600 points to end at 36,473, its lowest close since March 3, while the Nifty ended at 10,741, a level last seen on February 15. 

Most global markets traded mixed, even as the US Federal Reserve remained non-committal on more rate cuts.

Chief