The markets drifted lower in the last leg of the trade due to futures and options expiry; selling pressure in IT and metal shares also weighed.
After opening marginally firm, the Nifty witnessed a choppy session as traders' rolled over positions from August to the September series.
The Nifty touched a high of 4,915 during the opening trades and moved between gains and losses before giving into selling pressure in the last lhalf an hour of the trade.
The Nifty finally closed at 4,840, down 49 points and the Sensex ended at 16,146, down 139 points.
Market wide rollover was seen at 60% with pending positions in a few midcaps, compared to rollovers at 66% in the previous expiry.
Sahaj Agrawal, Associate Vice President-Derivatives from Kotak Securities said, "Nifty support was seen at 4,750-4,800 levels; led by a bounce back to 5,000 to 5,200 over the next month.
"Failure to sustain these levels could push the index down to 4,600-4,620 levels."
On the macroeconomic front, the government released the inflation data. The food price index rose 9.80%, while the fuel price index climbed 13.13% in the year to August 13. Primary articles inflation came in at 12.40%.
Analysts said that high inflation and tight liquidity were factored into the valuations.
According to Bloomberg, the Sensex was currently trading at 13.5x 1 year forward price to earnings multiple, which is lower than 10 year average of 15x. Jyoti Vaswani, CIO &
Gains were visible across most Asian markets as the manufacturing data from the Unites States provided some optimism to investors that the economy was not falling off the cliff.
The Nikkei, Hang Seng and Shanghai ended up over 23% each.
European markets too followed suit and were trading on a firm note with FTSE, CAC 40 and DAX trading between 0.1-0.7% higher.
Back home, Infosys, HDFC and HDFC Bank (down between 2-3%) were the major losers on the Sensex, dragging the index down by almost 80 points. Among the gainers were Tata Motors, ONGC and Bharti Airtel, up between 1-2%.
BSE IT index was the worst hit; Mphasis, Oracle and HCL Technologies were down between 5-7% each.
The BSE Metal index lost ground and was also one of the prominent losers. Jindal Steel was among the key losers, down 5%. NALCO and JSW Steel were also trading lower, down over 3.5% each.
From the broader markets, midcap and the smallcap indices ended down 0.9% each.
The market breadth was extremely negative. 1638 stocks declined for 1138 stocks which advanced.
