The benchmark Sensex on Tuesday plunged 298 points to close at a nearly two-month low as a steep fall in the rupee almost killed rate cut hopes.
The downbeat mood worsened as Jindal Steel shares plunged 15% after Jindal group scion and Congress MP Naveen Jindal and the company were named as accused in a fresh case filed by the CBI, in connection with the coal allocation scam.
Panic selling by foreign institutional investors and weak global markets also led to the fall. The index finally ended down 298 points, or 1.5%, to close at 19,143 points.
The broader NSE Nifty also breached the 5,800 level during afternoon trade on panic selling, before ending down 89 points, or 1.5%, to 5,789 points.
Analysts feel that markets will remain volatile during the week on the back announcement of data such as factory output growth and inflation, though in the long run the downfall will be reversed.
"FII selling in the last few trading sessions has led to selling pressure," said Nidhi Saraswat, senior research analyst, Bonanza Portfolio Ltd. FIIs were net sellers of up to R114 crore on Monday, according to provisional data.
"We expect volatility to continue this week," said Nagji K Rita, chairman & managing director, Inventure Growth & Securities.
"In the coming weeks, the market is likely to reverse losses," said Lalit Thakkar, managing director, institution at Angel Broking.