The benchmark BSE Sensex today plummeted 285 points to close at two-week low level of 19,008 after the government's key ally DMK withdrew support amid a weak global trend, even as the RBI cut repo rate.
After a higher start at 19,378.61, the Sensex dropped below 19,000 level before ending 285.10 points lower at 19,008.10, a level last seen on March 5.
The NSE index Nifty shuttled between 5,863.60 and 5,724.30 before ending lower by 89.30 points to 5,745.95.
Market sentiment battered after a major constituent of the ruling UPA government DMK withdrew its support over the issue of alleged human rights violations of Tamils in Sri Lanka. However, the Congress-led government said there was no threat to its stability.
Traders said the market received jolt after the RBI cut key interest rate by 0.25% but indicated that there is limited room for further monetary easing.
"The RBI has acted according to the expectation of the market. But still we saw Rupee and Sensex turning around on the back of hawkish comments made by the RBI," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The DMK pulling out the support from government spoiled the much created mood on rate cut expectation, he added.
A weak trend in the Asian region and lower opening in Europe before Cypriot lawmakers meet to discuss a bank-deposit levy, also shadowed the region stock markets, traders said.
Financial and interest sensitive stocks were major losers and pulled down the benchmark to suffer its biggest single day loss in last three weeks.
The stock of Bharti Airtel plunged 4.74% to Rs293.40 after a Delhi court summoned its Chairman Sunil Bharti Mittal in additional spectrum allocation case.
The banking index fell 1.97% to 13,209.63.
In 30-BSE index components, 24 stocks declined led by BHEL, Reliance Industries, Infosys, Jindal Steel, ONGC, Larsen and Toubro, Mahindra and Mahindra and Hindustan Unilever.
All sectoral indices were down led by realty and capital goods by losing up to 3.63%.