Benchmark indices dropped sharply in trade as investors turned cautious after the Reserve Bank of India in its Monetary policy today said that it was frontloading repo rate cuts.
The country's monsoon forecast was also downgraded to 88 percent of the long-term average, Earth Sciences Minister Harsh Vardhan said. To compound misery, European markets saw heavy selling pressure on worries that Greece may default on loans.
The Sensex fell a huge 660 points, while the Nifty dropped 196 points in trade as further rate hikes now seemed a remote possibility.
Leading the set of losers from the Nifty were banking stocks both from the private and the public sector banking space. Axis Bank, IndusInd Bank, Yes Bank, State Bank of India, HDFC Bank and Punjab National bank were among the losers.
The biggest drop was seen in Union Bank of India which fell a huge 7 per cent in trade.
Heavyweight, ITC dropped 3 per cent after the Maharashtra State Government banned the sale of loose cigarettes.
Reliance was the only gainer from the Nifty constituents in trade. Bharti Airtel also managed to end the day flat, while all other Nifty constituents ended deeply in the red.
Shares in Hero Motor Corp dived after sales volume dropped 5 per cent for the month of May. Emami fell 5 per cent despite reports that the company inked a deal to acquire hair & scalp care business of Kesh King.
Meanwhile, markets across Europe fell sharply as Greece debt crisis kept investors on the edge. European markets sold-off adding to pressure on the Indian markets.