Infosys crashed by 8.54 per cent after the company said it expected muted growth in January-March quarter and even probably in the next financial year.
After resuming lower, the Sensex recovered but traded in a narrow range on mixed Asian trends and better European opening.
Towards the fag-end, IT stocks, particularly Infosys, came under severe selling pressure, pulling down the bellwether index to 21,774.61, a fall of 81.61 points from its previous close.
The Sensex had closed at 21,513.87 points on March 6.
The 50-share index Nifty of NSE also dropped 23.80 points to end at 6,493.10.
"Buoyed by better than expected macro-economic data, equity benchmarks were seen making a positive start. However, gains remained capped as some cautiousness crept in the market as SEBI has tightened norms to prevent money laundering through capital markets," said Jayant Manglik, President, Retail Distribution, Religare Securities.
According to official data released after market hours yesterday, retail inflation eased to 25-month low of 8.1 per cent in February and industrial growth registered a modest growth of 0.1 per cent in January.
Sun Pharma was another big Sensex loser at 5.03 per cent after the US Food and Drug Administration imposed a ban on imports from generic drugmaker's at Karkhadi in Gujarat.
SSLT at 1.54 per cent, Axis Bank 1.13 per cent, TCS 1.18 per cent, Maruti Suzuki 1.01 per cent and Tata Steel 0.82 per cent were major losers.
M&M rose by 2.40 per cent, followed by ONGC 2.37 at per cent, HDFC Bank 2.30 per cent, Coal India 2.02 per cent, Hero Motocorp 1.82 per cent, Dr Reddy's Lab 1.63 per cent and HDFC 1.39 per cent.
Among sectoral indices, IT dropped by 4.06 per cent, followed by Teck 3.53 per cent, realty 3.47 per cent and healthcare 1.03 per cent. Oil&Gas rose 1.45 per cent and Bankex 0.92 per cent.
Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio, said: "Markets fell due to profit booking in the last half-an-hour session.... Market breadth was negative and volumes were higher than the last session."
"Overall, markets are in long-term uptrend, and buying is expected to continue. Inflation (wholesale) numbers is also due tomorrow, and will impact near term market trend," she added.
Meanwhile, foreign institutional investors bought shares worth Rs 864.35 crore yesterday, as per provisional data from stock exchanges.
Asian stocks closed mixed. Key benchmark indices from Hong Kong, Japan and Singapore closed with losses while from China, South Korea and Taiwan finished with gains.
European markets were also trading mixed in their early trade as investors awaited reports on American retail sales and initial jobless claims. Key benchmark indices in France and Germnay were up by 0.21 per cent- 0.27 per cent, while UK's FTSE was down by 0.01 per cent.
Total market breadth remained negative as 1,506 stocks ended in the red, while 1,287 concluded in the green. Total turnover rose to Rs 2,718.68 crore from Rs 2,454.86 crore yesterday.
BSE Sensex falters as Infosys, Sun Pharmaceutical shares falter
(Reuters) Indian shares fell on Thursday as Infosys slumped after its chairman said revenue could grow at the lower end of guidance for this fiscal year, while Sun Pharmaceutical Industries dropped after a U.S. ban on some of the drug-maker's imports.
Investors also booked profits in some of the recent outperformers that propelled indexes to record highs earlier this week, with some analysts voicing concerns about how fast shares have risen since last week.
The falls came despite data on Wednesday showing a sharper-than-expected drop in retail inflation and a slight expansion in industrial output, as analysts say expectations for an improving domestic economy are already largely priced in.
"We expect markets to trade range-bound for the near-term. Profit-taking is expected in select stocks and counters," said Deven Choksey, managing director, KR Choksey Securities.
The benchmark BSE index fell 0.37 percent, or 81.61 points, to end at 21,774.61 points, still near its record high of 22,023.98 points hit on Monday.
The broader NSE index also fell 0.37 percent, or 23.80 points to 6,493.10 points, near its all-time high of 6,562.85 points hit on Tuesday.
Foreign investors on Wednesday were net buyers for an eighteenth session out of the previous nineteen, with purchases of $250 million.
Despite continued buying by overseas funds, broader indexes fell after Infosys Ltd slumped 8.5 percent. Chairman Narayana Murthy said revenue for the fiscal year ending March could grow at the lower end of the company's 11.5 to 12 percent projection.
The fall on Thursday was Infosys' biggest daily percentage fall since April 12 last year when shares slumped 21.3 percent after the IT outsourcer issued a disappointing forecast for full-year sales growth.
Meanwhile, shares in Sun Pharmaceutical Industries lost 5.19 percent after the U.S. Food and Drug Administration (FDA) banned imports from the drug-maker's plant at Karkhadi in the western state of Gujarat..
It was not immediately clear why the FDA imposed the ban.
Among other stocks, real-estate developers fell sharply with the BSE realty index losing 3.4 percent on profit taking. DLF Ltd fell 6.03 percent after gaining nearly 27 percent so far this month, as of Wednesday's close.
However, some lenders gained, extending a recent rally. HDFC Bank Ltd rose 2.3 percent, bringing its monthly gain to 10.9 percent, while State Bank of India rose 0.4 percent, brining its gain so far in March to 7.8 percent.
State-run oil marketing companies also gained sharply, with Indian Oil Corp. up 4.2 percent, on media reports that the government may start distributing its oil subsidy for the October-December quarter starting from March 18