Equity market fell sharply by 1.3 per cent for Sensex and Nifty-50 as investors booked profit after an over 8 per cent rally triggered by the corporate tax rate cut announced by the finance minister.
Also the approval of impeachment investigations against US President unnerved the markets, brokers and analysts said.
Financials and auto stocks led the list of top losers in Wednesday's trading while IT and Power stocks were gainers.
It was a double whammy for the market participants as both domestic institutions and foreign portfolio investors were net sellers of equities worth Rs 762.48 crore and Rs 342.40 crore respectively as per the provisional stock exchange data.
Sensex closed 503.62 points or 1.29 per cent down at 38593.52 points while the broader Nifty-50 Index closed at 11440.20, down by 148 points or 1.28 per cent.
In the broader market BSE Mid-Cap Index fell 1.76 per cent while BSE Small-Cap Index fell 1.50 per cent.
Manav Chopra, Head- Research (Equity), Indiabulls Ventures said, “Nifty corrected sharply and market breadth was on the negative side. 11400 is the near term support on the downside for Nifty-50. Overall the undertone broadly continues to remain positive.”
"Nifty Bank being a high beta index witnessed sharper correction led by heavy weights. Support of 29,700 was broken on the downside. The next immediate support is placed at 29,200. Since the rise was near vertical supports are placed a bit far. The broader trend continues to be positive. Nifty Bank is likely to outperform going ahead and is likely to test its all time highs of 31,800. Broadly we continue to remain positive on the Nifty Bank," Chopra said.
Gaurav Dua, Senior Vice President, Head — Capital Market Strategy & Investments, Sharekhan by BNP Paribas said, "Global uncertainties and weakness in equities across regions nipped the recent upsurge in Indian equities post the announcement of fiscal stimulus on last Friday. The approval of impeachment investigations against US President has unnerved the markets. The political uncertainty in USA could certainly put further brakes on the global economic growth in the near term."
"Domestically also, the emergence of trouble in one of the large co-operative banks and possibility of the margin squeeze for public sector banks pulled down the Bank Nifty and the overall markets," Dua said.