The BSE benchmark, the Sensex was trading 118.12 points or 0.52% lower at 22,433.37 points at 12.00 pm IST, while the NSE's Nifty was trading 33.80 points or 0.50% lower at 6,718.75 points.
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The PMI fell to 47.5 in March from 48.8 in February.
Experts feel markets could come under pressure if an unstable coalition government is formed post elections. "If the elections throw up a surprise and we end up with a fragmented coalition, we believe the market will reverse its gains and we could see a sharp 15-20% correction," Bank of America Merrill Lynch said in a report.
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Among sectoral indices, the BSE Oil & Gas (-1.35%), BSE Capital Goods (-1.35%) and BSE Bankex (-1.07%) were trading lower. Among individual stocks, Bhel (-3.02%), ONGC (-1.99%) and SBI (-1.68%) were the major losers on the 30-share Sensex.
Asian markets were showing a mixed trend. The Nikkei (0.84%), Hang Seng (0.18%), Straits Times (0.78%) and Jakarta Composite (0.39%) were trading higher. Kospi (-0.18%), Shanghai Composite (-0.72%) and Taiwan Taiex (-0.19%) were trading lower.