The BSE Sensex extended losses for a fifth session on Tuesday with blue-chips such as Infosys continuing to reel on concerns that foreign investors are paring their holdings ahead of what are expected to be lacklustre earnings reports this month.
Both Sensex and Nifty are now at their lowest closing levels since September 13, 2012, when the government raised diesel prices, kickstarting bold reforms that included opening up the aviation and retail sectors further to foreign investors.
After strong purchases last year and much of this year, foreign funds have now sold Indian equities for four consecutive sessions as of Monday for a net total of $137 million, according to regulatory data.
India VIX, which measures the cost of protection via options and is seen by some investors as a "fear" gauge, added 0.3 percent to 16.82, marking a fifth session of advances and reflecting the rising volatility ahead of earnings.
"It is certainly looking weak as FIIs remain net sellers," said Paras Adenwala, Managing Director & Principal Portfolio Manager at Capital Portfolio Advisors, referring to inflows from foreign institutional investors.
"There is no doubt about it. All attempts to recover are getting sold into. Today's selling was vicious, which indicates there is a lot of pressure at higher levels."
The BSE Sensex declined 1.15 percent, or 211.30 points, to close at 18,226.48, its lowest close since September 13. The broader 50-share Nifty fell 0.86 percent, or 47.85 points, to close at 5,495.10, also its lowest close since September 13, although the Nifty had first reached that milestone on Friday.
The NSE cash market turnover was lower than the 30-session average.
ONGC fell 2.9 percent, while Infosys fell 2.3 percent, extending losses for a fourth session on worries that earnings due Friday may disappoint.
Blue-chips tend to fall the most during a period of worries about foreign investor selling given their higher relative share of overseas shareholdings.
Indian lenders also fell ahead of key macroeconomic data later in the week, which will set the tone ahead of the RBI's May 3 policy review.
State Bank of India fell 2.2 percent, while Punjab National Bank fell 2.3 percent.
Wipro slumped 12.3 percent in its first trading session as a standalone IT stock after the company split off its other businesses into a separate unit.
However, Cairn India Ltd rose 1.8 percent after the company reported an oil discovery in Rajasthan.
Tata Consultancy Services
NTPC ended 0.5 percent higher, while Ambuja Cements closed 0.4 percent up after Credit Suisse upgraded both stocks to 'outperform'.