Mumbai: The benchmark BSE Sensex Monday fell by 31 points to close at one-and-a-half month low of 27,319.56 amid mixed cues of a sharp decline in industrial production in October and zero level inflation in November, completing three days of losses.
Traders said rupee nearing 63-level also weighed heavily on investors. The domestic currency lost 65 paise to end the day's trading at 62.94 against the greenback.
Reacting to IIP data that came after close of market hours on Friday, the 30-share BSE index nosedived by over 245 points in early trade. Markets, however, saw buying picking up after the news of zero level inflation came in raising hopes of a rate cut by the Reserve Bank of India.
Traders said profit-booking emerged at every rise dragging the Sensex down by 31.12 points, or 0.11 percent, to close at 27,319.56.
The 50-issue NSE Nifty initially came below 8,200-mark but later rebounded to conclude at 8,219.60, still showing a small fall of 4.50 points or 0.05 percent.
Investor sentiment was also hit by signs of capital outflows, traders said, adding that trends were mixed in overseas markets.
Foreign portfolio investors (FPIs) were net sellers to the tune of Rs 864.96 crore last Friday, as per provisional data available.
"Extending their southward move, equity benchmarks made a weak start on Monday as investors reacted negatively to the weak industrial output data announced late Friday that fell by 4.2 percent in October....
"However, contraction in CPI and WPI inflation boosted the hope that the Reserve Bank would start lowering interest rates early next year, which aided some recovery," said Jayant Manglik, President, Retail Distribution, Religare Securities.
Dashing hopes of recovery, the industrial production, as measured by the index of industrial output, contracted by 4.2 percent in October, the sharpest decline in at least two years, on poor show by manufacturing sector and dip in the output of capital as well as consumer goods, according to government data that after Friday's market hours.
Inflation, however, was at zero level in November, the lowest in about five-and-a-half years, thanks to declining prices of vegetables and fuel items.
Country's largest software services exporter TCS was the top Sensex loser at 3.78 percent after in its outlook warned of weak December quarter on seasonality last Friday after market hours, putting pressure on market sentiment.
Besides IT, tech, capital goods, FMCG sectors also came under selling pressure.
Mortgage lender HDFC was the most sought after Sensex stock as it ended up 4.94 percent, capping the Sensex fall to a major extent.
Selling was so strong that only bankex from 12 sectoral indices finished in the green while other 11 ended in the red.
"Weak Asian markets, mixed sentiments with respect to domestic economic indicators and lack of strong cues from the government towards reforms in tax laws kept the markets volatile for the day," said Hiren Dhakan of Bonanza Portfolio.
Of the 30 Sensex stocks, 21 scrips closed with losses. Besides TCS, major losers included SSL 2.39 percent, Axis Bank 1.30 percent, Cipla 1.27 percent and Tata Motors 1.24 percent.
Among S&P BSE sectoral indices, realty tumbled by 2.07 percent, consumer durables by 2.02 percent, healthcare by 1.94 percent, teck 1.46 percent, FMCG by 0.97 percent and consumer goods by 0.88 percent.
Total market breadth remained weak as 1,722 stocks ended in the red while 1,177 that concluded in the green.
On the global scenario, Asian stocks, excepting China, closed lower between 0.07 percent and 1.57 percent on continued slump in oil prices that stoked concerns of worsening global economic outlook.
European markets were trading higher in their late morning deals. The CAC was up by 0.63 percent, the DAX by 0.76 percent and the FTSE by 0.65 percent.
