Heightening fears over the Greek economy led to the benchmark Sensex witnessing a freefall by more than 600 points in early trade on Monday, before recovering briefly and finally ending the day lower by 167 points at 27,645.15 points.
Greece shut down its banking system, ordering lenders to stay closed for six days starting June 29 to avoid a run on the country's banks. The steps, a fateful climax to five years of debt crisis, puts Greece closer than it ever has been to an exit from the euro zone.
"Indices sharply opened lower in line with global partners on account of Greece debt payment intensifying worries," said Gaurav Jain, Director of Hem Securities.
Falling for the second straight day, Sensex resumed lower and dropped by 602.65 points or 2.17 per cent to 27,209.19, but recovered afterwards to 27,695.32 before ending at 27,645.15, showing a loss of 166.69 points or 0.60 per cent.
"...Indian benchmarks bounced back on Finance Secretary Rajiv Mehrishi statement that fallout from Greece would not have a direct impact on India," Jain added.
Worried that the Greek crisis may trigger capital outflows, Mehrishi said earlier in the day that the Government is in touch with the RBI which will take necessary steps to deal with the issue.
The situation in Greece has no direct impact on India, he said but added that there may be some indirect effect via Europe on capital inflows and outflows here. The broader NSE Nifty also after dipping below the 8,200-point mark, recovered most of losses to close 62.70 points or 0.75 per cent down at 8,318.40.
Weakness in rupee against dollar that depreciated by 26 paise to Rs 63.90 (intra-day) too prompted investors to trim positions, traders said.
"Indian markets' recovery today could be tested on Tuesday as we get to know about the outcome of India-Mauritius joint working group's meeting on double tax avoidance," said Anand James, Co Head Technical Research Desk, Geojit BNP Paribas.
In overseas markets, European stocks were trading sharply lower on Greek crisis. Key indices in Germany, France and the UK were off 1.68 per cent to 3.31 per cent. Key indices from China, Hong Kong, Japan, Singapore, South Korea and Taiwan were down by 1.42 per cent 3.34 per cent.
Pramit Brahmbhatt, Veracity Group CEO said, "as expected today we saw sell off in the global markets, taking cues from the other markets Indian equities also opened on a weak note and lost over two per cent during the day as Greek debt crisis intensified more, mainly after failing to reach an agreement with the creditors." In the domestic market, 23 scrips out of the 30-share Sensex pack ended lower.
Major losers were Hindalco (3.55 per cent), SBI (2.08 per cent), Sun Pharma (2.03 per cent), Maruti (1.93 per cent), Tata Motors (1.76 per cent), Infosys (1.58 per cent), Bharti Airtel (1.45 per cent), ONGC (1.42 per cent), BHEl (1.38 per cent), Wipro (1.23 per cent), Vedanta (1.20 per cent), Cipla (1.15 per cent) and M&M (1.12 per cent).
However, HUl rose by 2.10 per cent, NTPC 0.80 per cent and ITC 0.53 per cent. Among BSE sectoral indices, realty tumbled by 2.23 per cent, followed by IT 1.70 per cent, teck 1.40 per cent, consumer durables 1.37 per cent, auto 1.37 per cent, metal 1.33 per cent and power 1.06 per cent.