The BSE benchmark Sensex plunged nearly 388 points on Thursday to close below 20,000-level,while the 50-share Nifty index slipped below the 6,000 mark in sync with global worries about a possible end to the US stimulus programme and a weak China manufacturing survey.
Among domestic factors,the 18.5 per cent dip in SBI profits on Thursday after Larsen & Toubro had set a weak outlook on Wednesday,guided the markets.
The Sensex dropped 387.91 points or 1.93 per cent to close at a 19,674.33. In four days the index has slid 612 points or 3 per cent. The broader Nifty at the National Stock Exchange fell 2.1 per cent or 127.5 points to close at 5,967.
On Wednesday US Federal Reserve chairman Ben Bernanke made comments suggesting bond purchases could be scaled back if the US economy improves.
The announcement followed a better-than-expected initial jobless claims data in the United States.
An early wind-down of the US stimulus programme could impact both the Indian currency and the capital markets as a result of the reduced flow of funds to the country.
Even before Mumbai opened for trade there was pressure as the Asian markets,tracking overnight losses in US markets,were trading in red. The Nikkei 225 in Japan crashed by 7.3 per cent during the day,premier indices of China and Hong Kong fell by 1.2 per cent and 2.5 per cent,respectively. The Nikkei 225 had risen by 15.5 per cent over the last one month.
The European markets,too,were trading in the red. The premier indices in Germany,UK and France were down by over 2 per cent.
Todays sharp sell-off in the equity markets was an outcome of a combination of global and domestic factors. Confusion regarding the US Federal Reserves stance on continuing its quantitative easing programme,sharp fall in Japanese markets and weak Chinese economic data coincided with disappointing results from local frontline companies L&T and State Bank led to heavy erosion in market value across the board, said Taher Badshah,senior V-P & co-head,equities at Motilal Oswal AMC.
Investors,however,expect the cut back in withholding tax on debt to 5 per cent would keep FIIs interested in India even if flows dry up from other emerging markets.
At the BSE,while the realty and capital goods indices fell by 6 per cent and 5.2 per cent,respectively,the power and banking indices fell by 4 per cent and 2.8 per cent,respectively.
Meanwhile,finance minister P Chidambaram on Thursday asked nervous investors not to be influenced by external developments and said that the domestic economic conditions are improving with easing inflation.
There is no need for any kind of nervousness. I think the Indian market should read the situation correctly rather than being influenced by something which is happening elsewhere, he said.