Markets ended at the day's low, on the back of selling pressure in information technology and banking stocks.
After a flat opening, the markets wilted under selling pressure in late morning trades following Japan's credit rating downgrade by Moody's, citing the country's large budget deficit.
The Sensex languished in the red for most part of the day, dropping, 242 points to touch a low of 16,256 towards the close.
The index finally ended with a 213 points loss at 16,284.
Nifty ended down 60 points at 4,888.
Asian markets also reeled under selling pressure after erasing morning gains post Moody's downgrade of Japan. Hang Seng dropped 2%, while the Nikkei, Straits Times and Seoul Composite shed 1% each. In Europe, however, CAC 40 and DAX were up around 0.5-1% each.
Global investors will be looking towards the Federal Reserve's monetary action, where
While another round of stimulus by Federal Reserve may bring foreign institutional flows back to India, macro-economic conditions continue remain a concern.
"Downgrade of Japan was on expected lines, But now bigger risk will come if Italy is downgraded as per many indication.
"Added Global rally or pull back has been on expectation of QE3 on Friday meeting, which will not support Asia anyway," feels A K Prabhakar, Senior Vice President Equity Research, Anand Rathi.
Back in India, analysts expect the markets to turn volatile tomorrow as investors roll over their positions on F&O expiry.
In other news, CLSA has cut the Sensex target by 1,000 points to 18,200. While the sharp correction in the market may suggest attractive valuations, the pace of corporate earnings downgrades has intensified in the recent results season, CLSA said.
