The markets closed around the day's low after spending a major part of the day in the negative as the result season and high inflation numbers seemed to keep the investors edgy.
The BSE benchmark index weakened by 295 points at 19,091 and the Nifty lost 95 points to close at 5,729. In the broader markets, the midcap index slid by 1% and the smallcap index shed 0.8% against the Sensex's losses of 1.5%.
Earlier in the day, after opening on a flat note, the markets made a sharp recovery led by gains in frontline shares such Reliance Industries and Larsen & Toubro where the Sensex touched a high of 19,649, up 558 points from the previous day's close.
However, in the late morning session a sudden bout of selling saw the Sensex tumble and touch a low of 19,071 before closing just shy of the 19,100 mark.
The overall inflation measured on the basis of Wholesale Price Index (WPI) was 8.31% in February. High prices of vegetables and manufactured items drove the headline inflation in March to 8.98%, way above the RBI's expectation of 8%.
With inflation showing no signs of moderation, economists expect the Reserve Bank to hike key policy rates by at least 25 basis points in its annual monetary policy to be unveiled on May 3.
On the last trading session of the previous week, Infosys kick started the earnings season on a negative note as results were below analysts' expectations. Brokerages expect a bumpy ride in the markets going forward if more front line companies undershoot estimates. Volatility is expected to remain high during the earnings season. The India VIX (Volatility Index) was up 5% at 23.
Hormoz Maloo, Technical analyst, Geojit BNP Paribas said, "The rise in the morning was quite unwarranted. We are within the result season, and as good and bad results are expected or announced the market would be quite volatile. In earlier quarters, the market has shown a good correction in the result season. I expect the same to occur this time also."
Elsewhere, the Asian markets too closed mostly in the red. Shanghai Composite and KLSE Composite were the only aberration which closed up 0.2% and 0.4% respectively. Among the major losers were Hang Seng down 0.7% followed by Nikkei and Straits Times declined 0.3% each.
Extending its losses for the second consecutive trading session, the IT index lost 2.7%. HCL Technologies down nearly 4%, TCS, Tech Mahindra and Infosys which lost nearly 3% each were the laggards among the IT space.
Hero Honda up nearly 2%, Hindustan Unilever and Bajaj Auto which added 2% each were the top gainers on the Sensex.
Apart from realty and IT scrips, the top losers among the Sensex stocks were Jaiprakash Associates, Tata Steel down 3% each followed by L&T, Hindalco, Tata Motors, BHEL and HDFC Bank down 2% each.
The market breadth was negative. Of the total 3012 stocks traded on the BSE, 1826 stocks had declined while 1083 had advanced.
