Market benchmarks halted their five-day rally to close with deep cuts on Tuesday, in line with a sell-off in global markets as participants dialled back risk exposure ahead of a key policy meeting of the US Federal Reserve amid continuing uncertainty over the Ukraine crisis.
A depreciating rupee and foreign capital outflows also weighed on sentiment, traders said.
After opening with gains of over 200 points, the 30-share Sensex turned highly volatile and tumbled in afternoon trade, before finally finishing 709.17 points or 1.26 per cent lower at 55,776.85.
Similarly, the broader NSE Nifty dived 208.30 points or 1.23 per cent to 16,663.
Tata Steel was the top laggard in the Sensex pack, sliding 4.89 per cent, followed by Kotak Mahindra Bank, Tech Mahindra, Infosys, Reliance Industries, HCL Tech and PowerGrid.
Mahindra & Mahindra and Maruti Suzuki topped the gainers' list, climbing as much as 2.31 per cent, after these firms featured in the list of 75 companies whose applications were cleared under the Production Linked Incentive (PLI) scheme for the automobile and auto components sector.
Asian Paints, Titan, Nestle India and Bharti Airtel were among the other winners. "The world equity market lost its momentum as new financial and trade sanctions were imposed on Russia along with the suspension of gas imports. It is a setback for the market sentiment, which was improving in anticipation of a truce in war. The Indian market was outperforming due to ease in commodity prices.
"World markets are also lower ahead of the US Fed meeting," according to Vinod Nair, Head of Research at Geojit Financial Services.