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Besides, deep losses in commodity, banking and financial stocks and concerns over stretched valuation contributed to the steep market decline, analysts said.
The 30-share BSE Sensex tumbled 692.89 points or 0.87 per cent to settle at 78,956.03. During the day, it tanked 759.54 points or 0.95 per cent to 78,889.38.
The NSE Nifty slumped 208 points or 0.85 per cent to 24,139.
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“The domestic market plunged into red terrain in the latter half, amidst mixed global sentiments. Recent IIP data indicates a lacklustre growth in the major manufacturing sector. Persistent selling by FIIs and elevated valuations are further contributing to the decline.
“All sectors, especially banking, metal were in red, while HDFC Bank declined due to lower-than-expected passive fund inflows in the recent MSCI index rejig,” said Vinod Nair, Head of Research, Geojit Financial Services.
From the 30 Sensex firms, HDFC Bank declined over 3 per cent. Tata Steel, Bajaj Finance, State Bank of India, Tata Motors, Power Grid and JSW Steel were the other laggards.
In contrast, Titan, HCL Tech, Nestle, Sun Pharma, Reliance and Mahindra & Mahindra were the gainers.
Seven firms, including Vodafone Idea and Oil India, would be included in the MSCI India Index effective August 30, 2024, as per the latest index review by MSCI.
Dixon Technologies (India), Oil India, Oracle Financial Services Software, Prestige Estates Projects, Rail Vikas Nigam, Vodafone Idea and Zydus Lifesciences are the additions to the MSCI India Index, according to an announcement by index compiler MSCI.
“The MSCI rebalancing is unfolding as anticipated, leading to mixed reactions among stocks — some are seeing gains, while others are experiencing profit-booking. A key focus is HDFC Bank, which will see an increased weight, though with a lower adjustment factor.
Consequently, the inflows will occur in two tranches, amounting to over USD 1.8 billion.
“HDFC Bank is currently under pressure after outperforming the market in the days leading up to the MSCI rebalancing, driven by expectations despite its weak earnings. The stock is now facing profit-booking, as investors react to the phased inflows,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
In the broader market, the BSE smallcap gauge declined 1.16 per cent, and the midcap index dipped 0.98 per cent.
Among the indices, commodities dropped 1.84 per cent, financial services declined 1.73 per cent, bankex (1.45 per cent), metal (1.37 per cent), services (1.18 per cent) and capital goods (0.84 per cent).
Consumer Durables emerged as the only gainer among the indices.
In Asian markets, Seoul, Tokyo Shanghai and Hong Kong settled in the positive territory.
European markets were trading mostly in the green. The US markets ended on a mixed note on Monday.
Foreign Institutional Investors (FIIs) again turned sellers on Monday as they offloaded equities worth Rs 4,680.51 crore after a day’s breather, according to exchange data.
“The weightage of HDFC Bank, the biggest private lender in India, would rise in its MSCI Global Standard Index over the course of two tranches. Although the street had expected the same thing to happen all at once,” Arvinder Singh Nanda of Master Capital Services Ltd said.
Meanwhile, retail inflation declined to a five-year low of 3.54 per cent in July mainly on account of subdued prices of food items, and base effect, according to official data released on Monday.
India’s industrial production slowed to a five-month low of 4.2 per cent in June 2024, mainly due to poor performance of the manufacturing sector, though power and mining sectors continue to perform well, as per official data released on Monday.
Global oil benchmark Brent crude declined 0.35 per cent to USD 82.01 a barrel.
The BSE benchmark ended lower by 56.99 points or 0.07 per cent at 79,648.92 on Monday. The Nifty dipped 20.50 points or 0.08 per cent to 24,347.