Muted quarterly earnings, mixed cues from global markets and unabated foreign fund outflows added to the volatility
Equity benchmarks nursed losses for the third straight day on Thursday as nervous investors took money off the table amid political wrangling in Karnataka and hardening crude oil prices.
The BSE Sensex plunged 239 points to end at 35,149.12, while the NSE Nifty tumbled 58.40 points to 10,682.70.
Globally, crude oil prices inched closer to $80 per barrel, stoking fears of rising import bills and worsening fiscal deficits for energy importers like India.
On the political front, BJP's B S Yeddyurappa was sworn in as the chief minister of Karnataka, even as the Supreme Court made it clear that government formation would be subject to the final outcome of the case before it.
Muted quarterly earnings, mixed cues from global markets and unabated foreign fund outflows added to the volatility, brokers said.
The 30-share Sensex resumed higher at 35,483.62 and advanced to a high of 35,510.01.
However, it tumbled to 35,087.82 in a sudden late-session sell-off, before finally ending at 35,149.12, down 238.76 points, or 0.67 per cent.
This is the benchmark's lowest closing since May 4, when it had closed at 34,915.38.
The NSE 50-share Nifty also lost 58.40 points, or 0.54 per cent, to 10,682.70, after shuttling between 10,777.25 and 10,664.50.
Foreign portfolio investors (FPIs) net sold shares worth Rs 699.22 crore, while domestic institutional investors (DIIs) bought equities to the tune of Rs 229.06 crore on Wednesday, as per provisional data.
"Market traded in a negative bias despite gains in rupee while investors' focus is now shifting to earnings after the state election dilemma.
"Small and mid-caps outperformed...On the global front, US yield rose above 3 per cent mark, whereas oil remains at elevated levels which could dampen the flow of funds to EMs, especially to India were the valuation is comparatively high." said Vinod Nair, head of research, Geojit Financial Services.
Among sectoral indices, FMCG suffered the most by falling 0.90 per cent, followed by bankex 0.63 per cent, metal 0.59 per cent, power 0.14 per cent, teck 0.11 per cent and IT 0.10 per cent.
On the other hand, consumer durables rose 1.37 per cent, realty 0.41 per cent, infrastructure 0.28 per cent, capital goods 0.24 per cent and oil and gas 0.08 per cent.
In the Sensex pack, ITC emerged as the biggest loser, plunging 2.43 per cent largely on profit-booking after yesterday's rally, followed by Bharti Airtel at 2.34 per cent.
Shares of Tata Steel fell 1.93 per cent despite the company on Thursday reporting a consolidated net profit of Rs 14,688.02 crore for the March quarter.
Other laggards were HDFC Ltd 2.08 per cent, Axis Bank 1.79 per cent, Adani Ports 1.47 per cent, Yes Bank 1.20 per cent, RIL 1.18 per cent, NTPC 1.12 per cent, Asian Paint 1.04 per cent, IndusInd Bank 1.01 per cent, Kotak Bank 0.99 per cent, L&T 0.86 per cent, ICICI Bank 0.67 per cent, Dr Reddy's 0.66 per cent, Hero MotoCorp 0.63 per cent, Infosys 0.43 per cent, M&M 0.38 per cent, HUL 0.31 per cent and TCS 0.08 per cent.
However, Coal India rose 2.53 per cent, Sun Pharma 1.75 per cent, Tata Motors 1.53 per cent, Wipro 1.15 per cent, Bajaj Auto 0.94 per cent, ONGC 0.91 per cent, HDFC Bank 0.15 per cent, Maruti Suzuki 0.14 per cent and SBI 0.06 per cent.
The broader markets outperformed the key indices, with the BSE mid-cap index rising 0.67 per cent and the small-cap index gaining 0.43 per cent.
Shares of Reliance Communications, after yesterday's plunge, staged a strong comeback by rising 56.87 per cent on reports of settlement talks with Ericsson.
In the Asian region, Shanghai Conmposite Index fell 0.48 per cent, while Hong Kong's Hang Seng slipped 0.54 per cent. Japan's Nikkei, however, rose 0.53 per cent.
In the euro zone, stock markets in Germany and France were up in early trade and rose up to 0.47 per cent.
London's FTSE too gained 0.11 per cent.