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Indian equity benchmarks weakened on Thursday amid a sell-off across global markets, after minutes of the Federal Reserve's last policy meeting triggered concerns about earlier-than-expected rate hikes. Losses across sectors such as financial, IT and oil & gas pulled the headline indices lower. However, gains in auto, consumer and PSU banking spaces limited the downside.
Worries about increasing cases of the Omicron variant of COVID-19 also dented investor confidence globally.
Both headline indices closed one percent lower to halt a four-session winning streak, though recovering some of their intraday losses. The Sensex ended 621.3 points lower at 59,601.8 and the broader Nifty50 benchmark settled at 17,745.9, down 179.4 points from its previous close.
During the session, both indices dropped as much as 1.5 percent. The 30-scrip shed 932.6 points to 59,290.6 and the Nifty slid to as low as 17,655.6, down 269.7 points from its previous close.
In the past four days, the Sensex and Nifty had surged 4.2 percent each.
JSW Steel, UltraTech Cement, Shree Cement, Tech Mahindra and Adani Ports, closing 2-3 percent lower, were the worst hit among the 35 laggards in the Nifty50 pack. On the other hand, UPL, IndusInd Bank, Bajaj Auto, Bharti Airtel and Maruti Suzuki, rising 1-2 percent, were among the top gainers.
The Nifty Bank ended 0.6 percent lower, though recovering about two-thirds of the day's losses. HDFC Bank fell 1.6 percent, Kotak Mahindra Bank 1.8 percent, and SBI and ICICI Bank 0.2 percent each. IndusInd Bank gained 1.8 percent and Axis Bank 0.3 percent.
"Fed minutes pointed to a faster-than-expected policy rate hike considering elevated US inflation levels. Investors are also watching the fast spread of COVID-19 cases and stricter restrictions being imposed," Vinod Nair, Head of Research at Geojit Financial Services.
Nair expects high volatility to persist in the market in the coming days.
NSE's India VIX index -- which gauges the expectation of volatility in the market -- surged more than four percent for a second straight day to the highest closing level since December 20.
UPL shares rose after CLSA raises its target price and FY22-24 earnings per share (EPS) estimates for the stock. During the session, the UPL stock gained as much as almost three percent to Rs 787 apiece on BSE.
Paytm parent One97 Communications' shares fell 2.7 percent to end at a closing low of Rs 1,253.9 apiece on BSE. The stock is now at a discount of 41.7 percent to the issue price.
Broader markets made it to green territory in the second half of the session, aiding investor sentiment somewhat. The Nifty Midcap 100 and Smallcap 100 indices eked out gains of 0.1-0.2 percent at the close, recovering more than one percent from their intraday lows.
Wockhardt finished the day with a gain of half a percent at Rs 438.4 apiece after the company's board gave nod to a rights issue of up to Rs 1,000 crore.
KPIT Technologies shares surged 6.3 percent to a record closing high of Rs 632 apiece, after Goldman Sachs initiated coverage on the stock with a 'buy' rating.
Overall market breadth was in favour of the bulls, with an advance-decline ratio of 5:3.
European markets began the day on a weak note. The pan-European Stoxx 600 index was down 0.9 percent at the last count.
S&P 500 futures were up 0.1 percent, suggesting a mildly positive opening ahead on Wall Street.