The Sensex on Thursday crashed by 257 points, its worst single-day fall in nearly seven weeks, after IT major Infosys' sharp cut in earnings outlook soured market sentiment prompting investors to shrug off even better-than-expected factory output growth in May.
The BSE benchmark index, which had lost 129 points in the previous session, dropped further by 256.59 points, or 1.47% to close at 17,232.55, recording the biggest single-day fall for the 30-share index after June 1 this year.
While Infosys' first quarter profit at Rs 2,289 crore came in lower than expected, the stock tanked over 8% as the company revised it FY13 US dollar revenue growth guidance to 5% year-on-year compared to 8-10% given at the end of March quarter.
Its larger rival TCS, which is expected to announce earnings later in the day, closed 1.80% down while Wipro shed 4% as sentiment turned weak. The IT index lost a whopping 5.11% on the BSE.
"Infosys results disappointed on all counts... the key issue now is will a price war start in the sector and hence even other companies could start exhibiting signs of strain," said Bhuvnesh Singh, analyst, Barclays.
As many as 21 stocks in Sensex today lost value with Bharti, M&M, Tata Motors and L&T losing in the 1.75-3% range as weak Asian cues and lower opening in Europe hit mood.
The 50-share NSE index Nifty fell by 71.05 points, or 1.34% to 5,235.25, dipping below crucial 5,300 level.
Brokers said the investors shrugged off positive cues from industrial production data for May. Industrial production growth rose by 2.4% in May, but April’s number was revised down to -0.9% from 0.1%.
"While May IIP growth has shown some positive surprise... we suspect that the final growth number may be much weaker," said Dhananjay Sinha, Co–Head, Institutional Research, Economist and Strategist, Emkay Global Financial.