The BSE Sensex plunged over 500 points tracking the sharp fall in the Indian rupee on Tuesday. The 30-share benchmark closed well below the psychological 19,000 mark, while the Nifty ended below the key 5,550 levels.
Markets fell for the ninth time in ten sessions after the rupee hit a record low of 61.80 against the U.S. dollar. The Sensex has now shed around 1,500 points over the last ten sessions.
The selloff was led by banking stocks, with the Bank Nifty falling around 4 per cent. Banking stocks came under selling pressure on continued uncertainty about how long would the Reserve Bank keep its liquidity tightening measures as the rupee hits a record low.
India's Reserve Bank has tightened liquidity to defend the rupee, but the continued weakness in the currency may push the central bank to hike long term interest rates to attract foreign capital. That will hurt banks because the risk of defaults on current loans will rise.
Large lenders such as ICICI Bank fell 4 per cent, while IndusInd Bank declined 7.7 per cent cut. Lenders such as Yes Bank slumped 8.3 per cent on fears the RBI would announce new cash-draining measures to defend the rupee after it hit a record low.
Bharat Heavy Electricals extended losses falling over 7.5 per cent. The company's quarterly profit dropped 49 per cent on sharply lower sales in its power and industry businesses in a slowing economy. Tata Power posted net loss of Rs 115 crore, and crashed 15 per cent.
Only four stocks closed higher on the Nifty. Tata Motors, Ambuja Cements, Power Grid and TCS managed to close in the green.
The breach of 5,600-5,550 levels has opened up serious downsides for markets, market analyst Sarvendra Srivastava told NDTV.
"The selling seems to be relentless and if these levels (5,600-5,550 are breached), the Nifty can fall another 300 points," Mr Srivastava said.
Ashish Chaturmohta of Fortune Equity Broking told NDTV that 5,500 levels may be hit in a short time.
(With inputs from Reuters)