The 30-share Sensex dropped 211.3 points, or 1.15%, to 18,226.48, while the broader Nifty retraced 47.85 points, or 0.9%, to 5,495.10. As a result, both indices closed at their lowest levels since September 13, 2012, before the government unleashed its reforms drive.
Foreign institutional investors intensified their selling for the sixth consecutive session that equaled an exit of $277 million worth of stocks since April 2, 2013. Weak economic growth and expectations of another sluggish earnings season have sparked the selling.
After purchasing $24.5 billion of Indian equities in 2012, and garnering $10 billion of stocks in three months of 2013, the FIIs have, in the recent past, slowed their buying spree as they also discount emerging political risks in the country ahead of 2014 general election.
In the quarter ended December 2012, the Indian economy grew at 4.5%, its weakest pace since 2009, discouraging hopes of an economic revival. Amid the slowdown, analysts trimmed down their earnings expectations for 2013-14. As per Credit Suisse, FY14 earnings still have a 10% downside and, thus, the market may not be attractive as such. The brokerage house expects higher downside for financials and industrials.
Tuesdays decline was fueled by strong correction in oil & gas and banking stocks even as some of the bluechip IT stocks retreated significantly. ONGC, BPCL and GAIl were the laggards from the Nifty space, which declined 2-3%. Even SBI and PNB lost close to 2%, while Infosys corrected 2.3%.
Wipro plunged the most in more than four years after the Indias third-biggest software-maker began trading after demerging three non-technology divisions. It dipped 12% to R393.7.
Following the current meltdown, the Indian market has turned one of the worst performers among Asian peers, having lost 6-7% in the year so far.