The market got a jolt when the news of militant attack on Iraq's main oil refinery this morning filtered in. As a result, Sensex plunged by over 400 points mid afternoon.
In energy trading, benchmark crude oil for July delivery added 41 cents to USD 106.77 on New York Mercantile Exchange.
Slowdown in foreign fund inflow and sharp rise in the rupee value to near 60.40 in mid-session deals also weighed on the domestic stock market sentiment.
Eleven out of the twelve BSE sectoral indices closed in the red logging losses between 0.72 per cent and 2.10 per cent. Realty, oil&gas, power, consumer durable, banking, auto and IT took the lead in the downslide while only healthcare index finished in the green.
The BSE 30-share indicator resumed better and moved in a narrow range till early mid-session. After falling sharply to a low of 25,114.30, it recovered some ground to end at 25,246.25, a net fall of 274.94 points or 1.08 per cent.
Yesterday, it had shot up by 330.71 points or 1.31 per cent.
The 50-issue CNX Nifty of the NSE also slumped by 73.50 points, or 0.96 per cent, to end at 7,558.20.
Jignesh Chaudhary, Head of Research, Veracity Broking Services said: "There was concern over the impact of higher oil prices on inflation as India imports 80 per cent of its oil requirements and higher oil prices will automatically elevate the inflation."
After markets closed Tuesday, government unveiled a host of steps to tame inflation that has soared to a five-month high of 6.01 per cent in May.
World stocks were muted today as investors waited for an update on the US economy later tonight from the Federal Reserve following its two-day policy meeting where it is widely expected to cut monthly stimulus further by USD 10 billion.
Asian stocks ended mixed as investors await the Federal Reserve monetary policy decision scheduled to be released later in the global day today.
Key benchmark indices in China, Hong Kong and South Korea fell by 0.09 per cent to 0.60 per cent while indices in Singapore, Taiwan and Japan rose up to 0.93 per cent.
However, European markets were trading higher in their early trade as indices in France, Germany and UK moved up by 0.20 per cent to 0.39 per cent.
Turning back to the local market, 23 scrips out of 30-share Sensex pack ended lower while seven finished higher.
Shrikant Chouhan, Head- Technical Research, Kotak Securities: Nifty remained highly choppy between the broader range of 7650 and 7500. Such type of formations indicates at major activity or fluctuations in the near term that might move the market by 2% to 3% vertically upward or downward. We are following 7670 on the higher side and 7485 on the down side. Above 7670 we can expect swing up to 7850 whereas below 7485 it may fall to 7320. Our domestic currency remained weak at 60.44 and crude prices remained firm on the back of problem in Iraq. Based on given issues our advice is to reduce weak trading long positions below the level of 7485. However investments into frontline stocks are highly advisable around 7300/7350 levels with a 3 to 6 months of view.
Major losers were BHEL (3.21 per cent), TCS (2.43 per cent), NTPC (2.26 per cent), RIL (2.12 per cent), Tata Motors (2.08 per cent), Sun Pharma (1.98 per cent), ICICI Bank (1.98 per cent) and Tata Steel (1.89 per cent).
M&M (1.81 per cent), Hero Motocorp (1.78 per cent), HUL (1.71 per cent) , Coal India (1.65 per cent), HDFC Bank (1.47 per cent), Tata Power (1.36 per cent) and Wipro (1.12 per cent) were among other Sensex laggards.
However, Cipla rose by 2.98 per cent, followed by Hindalco (2.74 per cent) and (Gail India 1.55 per cent) among others.
In the S&P BSE sectoral indices, Realty dropped by 2.10 per cent, followed by Consumer Durables 1.59 per cent, Power 1.51 per cent, Banking 1.07 per cent, Information Technology 1.04 per cent and Auto 1.01 per cent.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 48.02 crsyesterday as per provisional data from the stock exchanges.
Total market breadth turned negative as 1,631 stocks closed with losses while 1,400 finished with gains. Total turnover rose further to Rs 4,288.98 crore from Rs 3,790.44 crore yesterday.