Markets ended over 1% down on Tuesday amid political uncertainty after the DMK withdrew support to the ruling United Progressive Alliance and the Reserve Bank of India said that the headroom for further monetary easing remains quite limited.
The Dravida Munnetra Kazhagam pulled out of the Congress-led UPA coalition on Tuesday in protest against the government's position on a U.S.-backed United Nations resolution on war crimes carried out during Sri Lanka's civil war.
The 30-share Sensex ended at 19,008 down 285 points or 1.48% and the 50-share Nifty ended at 5,746 down by 89 points or 1.53%.
The Sensex and the Nifty reached an intra-day low of 18,939 levels and 5,724 mark, respectively.
On the global front, Japan's Nikkei average rebounded 2 %on Tuesday, regaining some ground lost in the previous session as fears receded that a controversial bailout proposal for Cyprus could reignite the euro zone crisis.
Analysts said that the disruption to the Japanese market from the unusual bailout plan for Cyprus seems to have run its course, although the Japanese equities market is prone to volatility because it is vulnerable to a rise in the yen when global market uncertainty increases.
The euro and European shares fell for a second day on Tuesday as investors worried about the uncertainty over a bailout for Cyprus aimed at preventing a debt default and banking collapse.
A government spokesman said Cyprus's parliament was likely to reject plans agreed by euro zone officials over the weekend to part-fund a 10 billion euro rescue of the island with a tax of between 6.75 and 9.9 % on bank deposits.
Back home, the Reserve Bank of India (RBI) in its mid-quarter review of the monetary policy on Tuesday has cut the repo rate by 25 basis points to 7.50%, but at the same time it also said that “the