The BSE Sensex, which had gained 58.25 points in the previous three sessions, fell by 92.77 points, or 0.42 per cent to 21,740.09 -- the weakest closing since 21,513.87 on March 6.
Intra-day, it touched a low of 21,704.66 and a high of 21,853.25. In the 30-share BSE index, 22 stocks led by HDFC Ltd and Larsen & Toubro (L&T) closed in the red. Aided by value-buying after recent weakness, Tata Consultancy Services (TCS) and Infosys led the eight Sensex gainers today.
The 50-share NSE Nifty fell 40.95 points, or 0.63 per cent, to end at 6,483.10.
US Federal Reserve chair Janet Yellen's comments after the Fed's first policy meeting sent ripples through global markets. At a press conference last night, reports said, Yellen implied Fed's time-frame for raising rates was closer to first half of 2015, sooner than expectations.
The Fed also voted to cut its monthly bond purchases from USD 65 billion to USD 55 billion.
In Asia, all major equity indices were sharply down. Prominent European indices were trading about one per cent lower each in early trades.
Brokers also indicated Indian market participants sold shares in banking and other interest-sensitive sectors ahead of the RBI's policy meeting on April 1.
The rupee also weakened to 61.4 levels against dollar.
"Post US Federal Reserve statement indicating that further tapering of monetary stimulus package shall continue and interest rates may also be increased in near future, market sentiment was poor...Metal stocks were also showing weakness on concerns over slowing demand in China," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.
Bucking the general trend, Tata Consultancy Services, Infosys and Wipro rose. TCS had led the fall in IT pack stocks yesterday on revenue growth concerns. The BSE-IT index today gained 1.69 per cent.
Among laggards, the BSE Realty sector index suffered the most by losing 2.23 per cent, followed by Capital Goods index (down 1.94 per cent), Power index (down 1.62 per cent) and Banking index (down 1.36 per cent).
* BSE index down 0.42 pct; NSE index closes 0.63 pct lower
* Investors book profits in recent outperformers
* IT shares gain on value buying
BSE Sensex retreats from record highs, sheds 93 pts; banks drag
(Reuters) Indian shares fell on Thursday, retreating further from record highs hit at the start of the week, on worries U.S. interest rates would rise sooner than expected and dent the appeal of higher-yielding emerging markets.
Recent outperforming blue chips such as ICICI Bank Ltd and ITC Ltd were among the leading losers after strong gains this month had sent the BSE and the NSE indexes to record highs on Tuesday.
Although India has largely been immune to global risk factors this month due to continued strong buying, earlier-than-expected U.S. rate hikes could reduce the appeal of emerging markets for funds overseas.
Short-term U.S. bond yields jumped by the most in almost three years on Wednesday after Federal Reserve Chair Janet Yellen said the central bank might end its bond-buying programme this fall, and could start to raise interest rates around six months later.
"The Fed has given indications that the rates could increase, and this will see FIIs (foreign institutional investors) cutting positions across emerging markets," said Suresh Parmar, head of institutional equities at KJMC Capital Markets.
"And especially in India, where they have been pumping money in almost every session (in a month). We advise our clients to be cautious and selective," he added. "Our markets are likely to trade range-bound in the medium term till elections."
The benchmark BSE index fell 0.42 percent to 21,740.09, off its record high of 22,040.72 hit on Tuesday.
The broader NSE index closed 0.63 percent lower at 6,483.10, away from its record high of 6,574.95 touched on Tuesday.
Recent outperformers fell on profit-taking. Overseas funds have been integral to the rally this month, and any signs they may reverse their course could hit shares.
FIIs bought Indian shares worth 10.7 billion rupees ($175.40 million) on Wednesday, marking their 22nd buying session in the previous 23.
Banking stocks fell, with ICICI Bank ending 0.76 percent lower but still up 15 percent this month. State Bank of India ended down 1.81 percent after gaining 9.4 percent during the same period.
Investors also cashed in on recent outperformers such as infrastructure and capital goods stocks. BHEL closed 2.79 percent lower, while Larsen & Toubro ended down 2.16 percent.
Other blue chips also fell, including ITC which ended down 1.08 percent.
However, losses were limited as investors also picked up beaten down shares. Technology stocks gained sharply with the BSE IT index up 1.69 percent on value-buying after a recent slump. Tata Consultancy Services gained 3.37 percent, while Infosys closed 0.96 percent higher.
Among other gainers, Hindustan Unilever gained 1.95 percent, while Reliance Industries closed 0.33 percent higher, also on value-buying.
Healthcare stocks also gained with Cipla up 1.16 percent.
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