Indian shares ended over 2.3% down on Thursday, shrugging off firm European cues and moderating food inflation, after uncertainty over policy reforms continued to weigh on market sentiment.
The Sensex ended down 389 points or 2.3% at 16,488 and the Nifty ended down 119 points at 4,944.
The Central Government formally put on hold the cabinet decision to allow up to 51% foreign direct investment (FDI) in multi-brand retail also weighed on market sentiment.
Shares in Europe rose ahead of the European Central Bank meet later today which is expected to announce cut in interest rate. CAC and DAX gained 0.4% each.
Asian markets however ended down with Nikkei and Hang Seng slipping 0.7% each on profit taking.
Food inflation fell sharply to 6.6% for the week ended November 26,compared with 8% in the previous week ended November 19.
Losses were led by index heavyweight Reliance Industries along with capital goods, financials, auto and metal shares.
Rate sensitive banking and realty shares fell on profit booking after recent gains. BSE realty index shed 3.8% to 1,598 while bankex dropped 2.7% at 10,266. BSE metal index dropped 3% to 10,500 mirroring losses in the London Metal Exchange.
Reliance Industries, which has the highest weightage in the benchmark indices, ended down 3.7% at Rs 779.
Capital goods shares declined on concerns of order inflows and the segment contributing the most to the slowdown in industrial output during October this year.
The index was the biggest loser among sectoral indices and dropped 4.4% to 9,644.
Auto shares declined after the Society of Indian Automobile Manufacturers said, the passenger car segment may not even see single-digit growth in the current fiscal.
However, according to recent data, domestic passenger car sales has increased by 7% to 171,131 units in November, 2011, from 159,939 units in the same month last year.
Auto shares, Mahindra & Mahindra dropped 4.2% to Rs 725. Maruti and Tata Motors shed 1% and 2% respectively. However, Bajaj Auto and Hero MotoCorp ended flat.
Among other prominent losers were Jaiprakash Associates, BHEL, Larsen & Toubro and Hindalco. Sterlite, DLF, SBI ad ICICI Bank also exerted pressure.
Wipro was among the few gainers in the Sensex - up 2.3% at Rs 413.
The stock climbed after the news that Wipro Infrastructure Engineering, the global Hydralics business of the company has signed a joint venture contract with Kawasaki Heavy Industries in India to set up a large manufacturing facility for the manufacture of hydraulic pumps for excavators.
Cipla and Sun Pharma from the pharma space inched up over 1% each.
BSE market breadth was negative with 1,909 stocks declining and 846 stocks advancing from the total 2,868 traded stocks.
