Markets pared early gains to end lower on Tuesday amid selling pressure in IT, FMCG and oil shares.
Broader markets fall nearly 2%, under-performing benchmark indices.
Deutsche Bank expects the Sensex to climb only 8% in 2017 to 29,000, and expects high volatility.
Experts believe FPIs will keep a close watch on coronavirus pandemic, its spread and likely impact on the economy while making decisions about investment into India.
The Sensex was mainly dragged by Reliance Industries, HDFC, HDFC Bank, ICICI Bank and SBI, which lost up to 3.35 per cent.
In the Sensex pack, losers included TCS, HUL, Tata Steel, HCL Tech, Infosys, Bajaj Finance, HDFC, IndusInd Bank, Asian Paints, ITC and Vedanta, shedding up to 3.70 per cent.
Continued dollar offloading by exporters and some banks on hopes further fall in dollar value overseas mainly supported the rupee.
FIIs bought stocks worth just Rs 83.16 crore as per provisional data.
In addition, dollar's weakness against other currencies overseas also supported the rupee.
The local currency had lost 119 paise in the past five sessions on rising worries over current account gap and fears that withdrawal of US stimulus will hit inflows from overseas.
The new series claims GDP grew at seven per cent between April and June 2015, while gross value added (GVA) grew at 7.1 per cent.
Materials and utilities were the worst-performing sectors in March.
Infosys was the top gainer in the Sensex pack, rising 2.36 per cent, followed by HDFC Bank up 1.39 per cent.
Telco proved the biggest draw in the 30-share BSE Sensex late afternoon on Friday as FIIs reckoned that the company will turn out exciting results for Q3.
Finance Minister P Chidambaram said on Wednesday the fall in stock market would not affect consumer demand, even as he attributed selling by FIIs partly to global meltdown.
The rupee on Tuesday gained 14 paise to close at 61.88 against the dollar.
In the Sensex pack, Yes Bank, Tata Motors, Bajaj Finance, Tata Steel, HDFC twins, IndusInd Bank, RIL, Asian Paints, Hero MotoCorp, Axis Bank, M&M, HUL, Bajaj Auto, NTPC, HCL Tech, Kotak Bank and Infosys fell up to 5.30 per cent.
Analysts expect FII investments to reach Rs 5,000 to 6,000 crore (Rs 50 to 60 billion) in the Indian equity and bond market by the end of September.
Concerns over economic slowdown, muted earnings, crisis in the auto industry and global trade issues have been weighing on investor sentiment, experts said.
Forex traders said a stronger dollar also dragged the rupee down.
Nifty ended down marginally at 5,625 -- down seven points.
A global selloff over Europe's sovereign debt problems and weak US economic data had a bruising effect on Indian stock markets today.
'Everybody fears them and rightly so. Who in his right senses wouldn't fear these agencies?' 'They can take away everything in seconds with near zero recourse to law.'
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Daily turnover down by a third in December compared to previous months.
There are a few factors that can spoil the party
The wider NSE Nifty too fell by 61.40 points or 0.57 per cent to end at 10,618.25.
The Sensex opened with a huge negative gap of 40 points at 5,629.
Cross previous high of $72 billion in 2007 as Indian promoters overcome the selling taboo. Abhineet Kumar reports from Mumbai.
The rupee shed 6 paise to hit a fresh 1-month low of 62.31 on Thursday.
Except for liquidity, which could act in favour or against the market in the short term, most market participants are bullish.
Market experts on why the bulls will be on the rampage first thing on Monday after the scrapping of enhanced surcharge on FPIs and other measures to ease the systemic liquidity squeeze and boost demand. Prasanna D Zore reports.
The rupee closed marginally stronger against the dollar on Wednesday.
Demonetisation, Donald Trump's surprise victory in the US presidential elections, and the fear that US Fed may hike rates in the upcoming policy review in December have dented market sentiments, report Puneet Wadhwa & Deepak Korgaonkar.
Sensex heavyweight Reliance Industries fell 2.76 per cent. In percentage terms, major laggards were Yes Bank, Indusind Bank, RIL, ICICI Bank, HDFC and Axis Bank -- plunging as much as 6.62 per cent.
Most markets have seen significant erosion in investors' wealth this year
The broader NSE Nifty after shuttling between 10,451.90 and 10,595.75 finally ended 100.30 points, or 0.96 per cent, higher at 10,582.50.
The sell-off in the equity markets, especially by foreign institutional investors, could have a ripple effect across asset classes and adversely impact consumer spending.
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