The benchmark indices snapped their four-day winning streak amid weakness in the global markets as investors remained on edge over the fate of the US debt ceiling bill ahead of the June 5 deadline.
The Sensex ended at 62,622, down 347 points or 0.5 per cent, while the Nifty shed 99 points, or 0.5 per cent, to end the session at 18,534. A rejig in the MSCI indices added to the volatility, as passive trackers hustled to realign their portfolios. Foreign portfolio investors (FPIs) churned shares worth more than Rs 1.26 trillion on account of the rebalancing exercise. They were net buyers to the extent of Rs 3,405 crore, capping a robust month of FPI flows.
Most European markets fell over the debt ceiling uncertainty. After passing a procedural vote in the House Rules Committee on Tuesday, the Fiscal Responsibility Act was provisionally scheduled to face a floor vote in the Republican-majority House on Wednesday.
Asian markets also on disappointing Chinese macroeconomic numbers which dashed hopes of finding a bright spot amidst global economic distress.
In the preceding four trading sessions the Sensex added nearly 1,200 points, or 2 per cent, coming close to breaching its previous lifetime high of 63,284 hit on December 1.
"The rally is being hindered at times due to negative signals from global peers. Concerns about a recession and potential interest rate hikes in western world are impacting the domestic market, but it is nevertheless maintaining the outperformance," said Vinod Nair, head of research at Geojit Financial Services.
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"Markets witnessed profit taking and shed over half a per cent, tracking mixed cues," added Ajit Mishra, VP-technical research, Religare Broking.
The changes to the MSCI indices—which got implemented on Wednesday—impacted over two dozen stocks. The index provider removed Adani Transmission, Adani Total Gas and Indus Towers from its index. All three stocks ended with losses of between 1.4 per cent and 4.8 per cent. Max Health, Hindustan Aeronautics and Sona BLW were added to the MSCI Standard Index. Meanwhile, Kotak Mahindra Bank saw sharp increase in its weightage. On the other hand, weightages of RIL, Infosys and ICICI Bank were lowered.
Market breadth was mixed with 1,871 stocks declining and 1,652 advancing. Close to two-thirds of Sensex stocks declined. Reliance Industries fell 1.7 per cent and contributed the most to index losses. HDFC Bank, which fell by 1.57 per cent, and HDFC, which fell by 1.9 per cent, were the other big contributors to Sensex's decline.
On Thursday, markets are expected to react positively to the better-than-expected gross domestic product (GDP) numbers for the March 2023 quarter. India's GDP growth rate rose for the first time in three quarters to 6.1 percent in January-March, the Ministry of Statistics and Programme Implementation said after the market closed. The market was expecting a growth of 5.1 per cent.