Falling for the fifth day in a row,the benchmark Sensex on Monday dropped by 56 points to end at over two-week low as November WPI inflation data cemented fears of a rate hike by the RBI in its policy review meeting this week.
Oil & gas, auto and FMCG shares saw selling while buying was seen buying in IT, consumer durables and healthcare.
After shedding 281 points last week, the Sensex fell further by 56.06 points, or 0.27% to end at 20,659.52.
The 30-share index, which was today dragged lower by losses in RIL, HDFC Bank and Sun Pharma shares, has now lost 667 points in five straight sessions to end at its lowest level since November 28 when it had ended at 20,534.91.
The broad-based National Stock Exchange index Nifty fell by 13.70 points, or 0.22%, to 6,154.70, after touching the day's high of 6,183.25.
Costly vegetables, particularly potato and onion, pushed the November wholesale inflation to a 14-month high of 7.52%. Last week, government data showed November retail inflation spiked to above 11%.
"Market participants are widely expecting a 25-bps point repo-rate hike on December 18 policy, taking the repo rates to April 2012 levels... there are (also) a lot of speculations with regard to the overseas meeting that will decide the fate of the QE status," said Vishal Jajoo, Senior Research Analyst (PCG), Nirmal Bang Securities.
A weakening trend in Asia after Chinese manufacturing data missed market estimates and speculation that the Federal Reserve might taper its stimulus this week, also affected domestic activity, dealers said.
Infosys surged to an almost 3-year high and Wipro also touched multi-year highs. Sesa Sterlite soared 4.5%.
In the broader market, 1,105 scrips advanced, 1327 fell and 180 closed unchanged. GSK Pharma shares jumped nearly 19% after open offer from UK-based parent. Spicejet jumped 8% after air connectivity pact with Tigerair.
"The market may remain in a volatile mode till the outcome of the RBI and the US Fed policy meeting on December 18," said Delhi-based broker Rajiv Malik of RNM Securities.
Sectorally, the Oil & Gas sector index suffered the most by losing 1.61%, followed by Auto (0.70%) and FMCG index (0.49%).