The benchmark BSE Sensex plunged by 351 points on Wednesday to fall below the 27,000-mark on heavy selling in realty and FMCG sectors as contraction in services sector for the first time in 13 months coupled with drought fears hit market sentiment.
In last two sessions, the Sensex has lost 1,011.79 points.
A day after RBI chief's comment over risk of inflationary worries due to deficient monsoon amid global uncertainties, bearish sentiment persisted on economic recovery concerns.
"Several short-term concerns have overshadowed investor sentiments, which have led to the Indian stock market sliding for the second consecutive trading session. Thus, the probability of a rate cut in the next policy meet has becoming much slimmer," said Hitesh Agrawal, Head Research of Reliance Securities.
Frantic unwinding was seen across-the-board with rate sensitive counters hitting hard along-with frontline FMCG stocks. Mid-cap and small-cap too saw large scale selling.
The Sensex after remaining in positive zone briefly at the outset, slipped into the negative zone and dipped below the 27,000-mark to hit a low of 26,698.26.
It settled 351.18 points or 1.29 per cent lower at 26,837.20. This is the lowest closing since May 7, when the index had closes at 26,599.11 points.
The 50-scrip Nifty after breaching the key 8,100-mark intra-day to touch a low of 8,094.15 ended at 8,135.10, down 101.35 points or 1.23 per cent.
"RBI?s rate cut of just 25 bps against market expectations of 50 bps along with grim monsoon estimates by IMD kept the Indian markets volatile today as well," said Rakesh Goyal, Senior Vice President of Bonanza Portfolio.
Of 30-share Sensex pack, 24 stocks ended in the red.
The biggest selloff was seen in realty stocks, with the BSE realty sector index sinking 5.54 per cent.
Unitech crashed 35.17 per cent and HDIL tanked 6.03 per cent, while DLF stocks fell 2.48 per cent.
Shares of Nestle India saw another session of selling pressure and slumped 9.21 per cent amid growing concerns about safety standards of its popular Maggi noodles.
Meanwhile, services sector contracted for the first time in 13 months in May as orders turned sluggish and companies raised prices, an HSBC survey showed on Wednesday, raising fresh concerns about the real economic growth at ground level.
Banking and financial stocks remained under selling pressure for the second day owing to uncertainties over future rate cut with key heavyweights falling sharply.
Among the BSE sectoral indices, realty tanked by 5.54 per cent, followed by FMCG 3.45 per cent, power 2.22 per cent, oil&gas 2.05 per cent, consumer durable 1.70 per cent, capital goods 1.52 per cent, auto 1.52 per cent, healthcare 1.47 per cent, bankex 1.41 per cent and metal 1.19 per cent.
Mid-cap and small-cap slipped by 1.38 and 1.98 per cent, respectively.
The biggest losers on the Sensex were Tata Power sliding 6.13 per cent, ITC 4.59 per cent, ONGC 3.81 per cent, Vedanta 3.67 per cent, GAIL 3.44 per cent, SBI 3.27 per cent, ICICI Bank 2.84 per cent, HUL 2.46 per cent, Tata Motors 2.13 per cent, Sun Pharma 2.07 per cent, BHEL 1.19 per cent, Tata Steel 1.63 per cent, M&M 1.52 per cent, Dr Reddy's 1.43 per cent, Maruti 1.36 per cent, Bajaj Auto 1.25 per cent, L&T 1.16 per cent, Hero MotoCorp 1.14 per cent and Hindalco 1.01 per cent.
The market breadth was weak as 2,127 stocks declined, while 603 advanced and 78 ruled steady. The total turnover rose to Rs 3,501.33 crore from Rs 3,086.68 crore on Tuesday.