Benchmark indices Sensex and Nifty declined by more than half a per cent at close on Monday due to selling in IT, power and metal shares triggered by a global equity meltdown on rate hike fears and FII outflows.
Snapping its five-day gaining streak, the 30-share BSE Sensex settled lower by 334.98 points or 0.55 per cent at 60,506.90. During the session, the index fell over 500 points to touch its intra-day low of 60,345.61.
The broader NSE Nifty dipped 89.45 points or 0.50 per cent to close at 17,764.60 as 34 of its stocks dropped.
"A strong job market in the United States pushed the global market lower on rate hike fears, as it offers the Fed more leeway in enacting stricter policy measures. This was in contrast to the recent rally in the global indices on the expectation that the economy is in its last phase of policy tightening.
"The RBI's policy announcement on Wednesday will provide more colour on its future rate actions, which is expected to hike rate by 25bps," Vinod Nair, Head of Research at Geojit Financial Services, said.
Tata Steel was the biggest loser in the Sensex pack, falling 2.08 per cent, followed by Kotak Bank, Infosys, ICICI Bank, M&M, Ultra Cement and Tata Motors.
On the other hand, IndusInd Bank, Bajaj Finance, PowerGrid and ITC were among the major winners.
State Bank of India closed marginally up 0.17 per cent after Finance Minister Nirmala Sitharaman said that banks and insurance companies are "not overexposed" to any one company and assured that Indian markets are very well managed by its regulators.
Adani group stocks, except for Adani Ports, continued to decline amid the opposition parties demanding a Joint Parliamentary Committee probe or a Supreme Court-monitored investigation into allegations of fraud and stock price manipulation by Adani group.
Adani group flagship Adani Enterprises closed marginally down, Adani Power down by 5 per cent, Adani Transmission by 10 per cent, Adani Total Gas by 5 per cent and Adani Green by 5 per cent.
Adani Ports and Special Economic Zones Ltd also gained 9.46 per cent after the group said that the promoters will pre-pay USD 1,114 million for the release of pledged shares of its firms ahead of the maturity in September 2024.
These shares belong to Adani Ports & Special Economic Zones, Adani Green Energy and Adani Transmission, a statement said "While the sentiment has been sluggish over the past week or so, today's fall can be attributed to weak Asian cues and a cautious approach from the investors ahead of the RBI's credit policy. Selling seemed to have been triggered by further strengthening of the dollar against the rupee, leading to weakness in metal, power & select banking stocks," Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.
In the broader market, the BSE midcap gauge rose 0.75 per cent and smallcap index gained 0.49 per cent.
Among sectoral indices, metal dipped 4 per cent, utilities fell 1.26 per cent, Power declined 1.01 per cent, IT (0.67 per cent) and tech (0.65 per cent).
Telecommunications, services, Capital Good, and Bankex were among the winners.
Foreign investors pulled out Rs 28,852 crore from Indian equities in January, making it the worst outflow in the last seven months, primarily due to the attractiveness of the Chinese markets.
With retail inflation showing signs of softening and the US Fed moderating the pace of increase in its benchmark interest rate, the Reserve Bank is likely to settle for a smaller 25 basis points repo rate hike in its forthcoming bi-monthly monetary policy due later this week.
Global stocks were largely down after last week's stronger-than-expected US jobs report raised the likelihood of further interest rate increases and geopolitical concerns increased after the US shot down a suspected Chinese spy balloon that had floated across the country for days, Deepak Jasani, Head of Retail Research, HDFC Securities, said.
Elsewhere in Asia, equity markets in Shanghai and Hong Kong ended in the red, while Tokyo and Seoul settled higher.
Equity exchanges in Europe were trading lower in mid-session deals.
Markets in the US ended in the negative territory on Friday.
International oil benchmark Brent crude rose 0.09 per cent to USD 80.01 per barrel.
Foreign Institutional Investors (FIIs) offloaded shares worth Rs 932.44 crore on Friday, according to exchange data.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)