The domestic equity bourses fell on concerns that the government might take steps to curb capital inflow if foreign investment surge prompts overseas investors to book profits. The 30 share Sensex of the Bombay Stock Exchange lost 213.13 points or 1.25 % to end the day at 16,785.65 points. The broader S&P CNX Nifty of the National Stock Exchange ended the trading session at 4,989, losing 1.30% or 65.70.

According to the provisional figures furnished by the BSE, foreign institutional investors (FII) were net sellers to the tune of Rs 459.18 crore, while domestic institutional investors were net buyers of equity worth Rs 116.79 crore. Foreign Institutional Investors have pumped in over $15 billion in the country?s equities market so far this year.

Brazil?s latest move to curb capital inflows and weakness in European markets also weighed on the market sentiment, although finance minister Pranab Mukherjee has said that the rush of foreign funds into the country was not a matter of concern. The government has, however, said that it would continue to monitor the flow of fund and act if there was any distortion.

Industry chamber Assocham?s suggestion to the government on Tuesday that foreign fund inflows should be subject to a 2% tax may also have affected sentiments.

Market experts said that they were not surprised at the market volatility, as most of the FIIs are currently booking profits. Even mutual funds and insurance firms are booking profits that could see the Indian markets correcting further in coming days.

?Over the next couple of days, we are projecting a fall of 500 to 600 points,? said Ambreesh Baliga, vice-president, Karvy Stocks Broking.

?We are certainly at the higher side of the range and going forward a lot would depend on the movement of the dollar index. There was some amount of unwinding of positions in the banking and realty sector stocks that brought the market lower,? said Siddarth Bhamre, fund manager and derivative analyst with Angel Broking.

Among the sectoral indices, BSE realty index was the biggest loser, down 4.36%, led by DLF that fell by 3.8% to Rs 380.65. The BSE bankex fell 1.95% with SBI and ICICI Bank losing 2.15% and 2.18%, respectively.

The market breadth indicating the overall health of the market remained negative throughout the trading session with 60% or 1,682 stocks in the BSE ending the day in the red compared to 1,052 stocks that advanced. Among the Sensex pack, 27 ended the day on a negative note while only three stocks advanced.