Sensex plunges by 447 pts

Equities skidded 2.7 per cent to their lowest close in three-and-a-half months on Tuesday.

Equities skidded 2.7 per cent to their lowest close in three-and-a-half months on Tuesday as Europe8217;s sovereign debt woes sparked heightened fears of larger foreign fund outflows.

Financials and energy major Reliance Industries led the slide amid worries the problems in Europe may trigger a renewed crisis in the continent8217;s banking sector and delay a world recovery.

Although India8217;s economy is firmly on an upward trajectory,thanks to strong domestic demand,the weak global sentiment has doused investor appetite for risky assets and foreign funds have come under redemption pressure.

8220;Even though fundamentals are in our favour,liquidity and sentiment are currently acting against the market,8221; said Sanjeev Patkar,director of research at Almondz Global.

The 30-share BSE index shed 2.71 per cent,or 447.07 points,to 16,022.48,its lowest close since Feb. 10. Only one of its components managed to close in the green.

The benchmark has lost 8.7 per cent so far in May,weighed down by foreign fund withdrawals of around 1.8 billion as the deteriorating fiscal health in Europe rattled world markets.

The fall was almost in line with China8217;s Shanghai Composite Index that is down 8.6 per cent but lower than Brazil8217;s Bovespa stock index which has shed 11.3 per cent in May.

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The BSE index has also fared better than MSCI8217;s measure of Asian markets other than Japan that has fallen 13.1 per cent so far in May and MSCI8217;s emerging market index that has dropped 12.6 per cent.

Foreigners are still net investors of around 4.8 billion in Indian equities in 2010.

8220;The market will stay rangebound until we have more clarity on developments in Europe,8221; Patkar said.

World stock markets tumbled with pan-European FTSEurofirst 300 index of top shares down 3 per cent by 1017 GMT,while MSCI8217;s index of Asian shares other than Japan dropped 4.6 per cent,hit by the euro zone worries and tensions in Korea.

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Highly indebted Italy was the latest euro zone country due to announce a three-year austerity plan worth 24 billion euros later on Tuesday.

On the weekend,the central bank had taken over a small Spanish lender,leaving investors worried over what next was in store in the region.

Trouble started showing up in Europe weeks ago when a debt crisis begun in Greece.

Top lender State Bank of India dropped 3.9 per cent,while rivals ICICI Bank and HDFC Bank closed down 2.7 per cent and 1.1 per cent respectively.

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Standard Chartered,which is raising as much as 588 million through an issue of Indian depositary receipts,saw investors bidding for just 4.5 per cent of the 204 million shares on offer by 4 p.m. 1030 GMT on the first day of sale.

Mukesh Ambani-led Reliance Industries,which has the highest weight on the Sensex,dropped 3.4 per cent to Rs 986.85.

Export-led software companies declined on concerns the deteriorating fiscal health of the euro zone will lead to reduced order flow from the region.

Top outsourcer Tata Consultancy Services shed 2.7 per cent,while Infosys and Wipro lost 2.4 per cent and 2.2 per cent respectively.

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In the broader market,losers outnumbered gainers in the ratio of 4.7:1 on a relatively low volume of 301 million shares.

The 50-share NSE index fell 2.8 per cent to 4,806.75,its lowest close since Feb. 15.