Markets nosedived on Tuesday with BSE Sensex shedding 190 points after investors hopes of a boost to economic reforms were dashed by poor performance of Congress, which heads the UPA government at the Centre, in state Assembly elections.
Dealers said the election outcome would push the UPA government on the back-foot and it may not be able to carry on with reforms due to resistance from Opposition parties at the Centre.
The 30-share barometer resumed lower at 17,336.64 and hovered in a wide range of 17,691.96 and 17,128.28 before ending at 17,173.29 points, a net loss of 189.58 points, or 1.09 %, from its last close.
The biggest losers banking, oil and gas, capital goods, power and metal stocks closed down in the region of 1 % to nearly 4 %.
"The Congress winning the Uttar Pradesh elections would have been a welcome news for the markets since that would have ensured a smooth ride for the reforms initiated by the government at the Centre," Shanu Goel Research Analyst Bonanza Portfolio said.
However, profit booking emerged after it became evident that Mulayam Singh's Samajwadi Party would form the state government on its own without any help from UPA leader Congress party, he said.
European stock markets dropped in the afternoon trade as on concerns about global growth which also impacted the market sentiment. Key benchmark indices in the UK, France and Germany fell by 0.82 % to 1.46 %.
China yesterday lowered its growth target for 2012 to the lowest level in eight years, which fuelled concerns about global growth.
Asian shares ended lower with steel makers among the top decliners on concerns about global growth. Key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan shed by between 0.63 % to 2.16 %.
The NSE 50-share Nifty also declined further by 57.95 or 1.10 %, to finish at 5,222.40 points.
The BSE-Metal index fell the most by 3.88 % with Tata Steel and Sterlite declining over 5 % on global growth concerns.
Among losers form the Sensex pack, Hindalco declined by 5.75 %, Jindal Steel by 4.28 % and Tata Power by 4.11 %.
Telecom major Bharti Airtel dropped 3.66 %, BHEL by 3.23 %, Tata Motors by 2.72 %, while market leader RIL fell by 2.68 %.
Engineering giant Larsen & Toubro fell by 2.44 %, Cipla by 2.11 %, ICICI Bank by 1.98 %, Hero Motocorp by 1.07 % and State Bank of India by 1.06 %.
However, DLF shot up 2.73 % followed by ITC 1.45 %, Infosys 1.41 % and Maruti Suzuki 1.01 %.
Small-cap and mid-cap indices were also quoted lower by 1.29 % and 1.11 % respectively due to persistent selling pressure from retail investors.
However, the BSE-FMCG inched up by 0.79 %, the BSE-Consumer Durable by 0.62 % and the BSE-IT by 0.52 % on mild buying support.
The total market breadth continued to rule weak, as 1,773 stocks finished with losses while 1,048 stocks ended with gains. The total turnover shot up to Rs 3,037.53 crore from Rs 2,456.13 crore previously.