The stock markets on Thursday snapped their two-day winning streak after Asian markets witnessed a sell-off as weak economic data from Japan and China renewed concerns over the global economic growth.
The benchmark S&P BSE Sensex was down 97 points, or 0.38%, to close at 25,622, while the NSE Nifty ended the day at 7,788 points, down 30 points.
In the opening session, the Sensex fell more than 400 points, touching an intra-day low of 25,288 points, before paring most of the losses.
"The market remains indecisive for now. The healthy sign is it is looking at recovering as quickly as possible. Technical levels, however, do not bring any comfort for now. Short-covering saved the day as auto, Oil & Gas and beaten down mid-cap stocks brought in the much needed relief after a tumble at start," said Amar Ambani, Head of Research, IIFL.
Foreign investors continue to offload their holdings aggressively amid intensifying worries over global growth. In the past seven sessions, they have sold stocks worth nearly Rs 6,000 crore.
In China, producer prices fell for the 42nd consecutive month in August, indicating the world's second largest economy is heading towards severe deflationary risks.
On the other hand, Japan's core machinery orders for July came below market expectations, raising doubts over the growth recovery in Asia's second biggest economy.
Following the disappointing data, the Chinese and Japanese stock markets ended lower by 1.5% and 2.5%, respectively. Besides, Standard & Poor's downgrade of Brazil's credit rating to junk added to the concerns.
"Topping the headlines was Brazil's downgrade by S&P. Companies which had businesses in Brazil were at the receiving end even though no immediate impact is likely on them," Ambani said.
Metal stocks traded weak following weak data from China. While Hindalco, NMDC, and Jindal Steel ended over 2% lower, Vedanta and JSW Steel were down 0.2% and 0.5%, respectively.
Short-covering helped banking stocks to shed most of the losses in the last hour of trading. While ICICI Bank rose 1.1%, HDFC Bank, Axis Bank and SBI ended the session in red.
In the auto space, Hindustan Motors (3.7%), Eicher Motors (2.9%), Tata Motors Ltd (2.7%), Bajaj Auto Ltd (2.1%) and Hero Honda Motor (0.2%) were the top gainers. The gains came after an official data showed that car sales in the country rose for the 10th straight month in August.
Reversing the gains made in the previous session, the rupee depreciated by 29 paise to clost at 66.43 against the US dollar. A strengthening greenback in the overseas markets weighed on the rupee.
Gold prices fell for the third consecutive session, slumping by Rs 260 to Rs 26,415 per 10 gm. The yellow metal prices remained under pressure ahead of the US central bank policy meeting next week. Silver prices also declined by Rs 80 to Rs 35,250 per kg due to weak demand from industrial units and coin makers.