The Sensex dropped 70 points, while the Nifty was trading lower by 25 points at 5648 points. Among the shares that dropped in early trade were Sterlite Industries, Tata Power, Hindalco and Infosys.

Among the shares that gained in trade were Reliance, Hindustan Unilever, ITC, Cipla and Cairn India.

Shares of Maruti were down more than 1.65% after the company completed settlement with Gurgaon workers, which would likely to have additional cost to the company.

IFCI dropped almost 10%, after the Securities and Exchange Board of India approved the government's stake hike in the company.

Small cap stock Pennar Industries jumped after the company received order worth Rs 70 crore from Texmaco, L&T and Mahindra EPC.

Banking stocks continued to lose ground with ICICI Bank, Axis Bank, State Bank all drifting lower. PSU banks which have seen a sharp surge in their share prices dropped with Syndicate Bank, Canara Bank, Allahabad Bank and Indian Overseas bank all falling.

Markets are expected to remain volatile on account of the concerns in Europe and in the absence of any major triggers.

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