Mumbai: The BSE Sensex and Nifty fell nearly 1 per cent on Monday, posting their biggest single-day decline in nearly five weeks as blue chips declined on anxiety after China's factory output slowed and caution ahead of the Federal Reserve meeting this week.
Shares retreated further from a record high hit last week as Asian stocks skidded to five-week lows after a batch of weak data out of China raised the spectre of a sharp slowdown in the world's second-biggest economy.
Traders await outcome of the Federal Reserve's two-day meeting ending on Thursday for near-term direction as a recent string of improving US economic data like domestic retail sales has raised expectations the central bank may act sooner to raise interest rates.
On domestic front, India's wholesale price index-based inflation in August eased to 3.74 per cent, its lowest level in nearly five years and core CPI fell sharply by around 50 basis points on month, raising hopes of at least positive rate outlook in Reserve Bank of India's policy review on September 30.
"Fed rate hike worries are weighing but given the inflation prints at home one should expect the market to start building in potential rate cut by RBI in the next 3-6 months," said Deven Choksey, managing director at K R Choksey Securities.
The benchmark BSE Sensex fell 0.9 per cent, or 244.48 points, to end at 26,816.56, marking its lowest close since August 28.
The broader Nifty lost 0.78 per cent, or 63.50 points, to end at 8,042 - its lowest close since September 1.
Both the indices marked their biggest single-day falls since August 8.
Blue-chips led the falls. ITC Ltd fell 1.1 per cent, while Housing Development Finance Corp ended 1.5 per cent lower.
Metal shares fell after a weaker-than-expected factory output data in the world's second largest economy. China's factory output grew at the weakest pace in nearly six years.
Tata Steel fell 1.6 per cent and Hindalco Industries lost 3 per cent.
Yes Bank fell 5.2 per cent after the RBI on Friday said further share purchase in the lender by foreign investors will be allowed only after obtaining the apex bank's approval. However, Fortis Healthcare surged 6.5 per cent after Malaysia's IHH Healthcare Bhd said on Friday it was buying the company's Singapore unit.
Mid-cap state-run banks gained on fresh long positions in equity derivatives after positive inflation data.
Copyright @ Thomson Reuters 2014