Equity benchmark indices Sensex and Nifty buckled under selling pressure to settle nearly 1 per cent lower on Friday as investors pared exposure to bank and IT stocks ahead of the earnings season starting next week.
A depreciating rupee against strengthening US dollar overseas further weighed on sentiment, traders said.
Despite a positive start, the 30-share BSE Sensex tumbled 720.60 points or 0.90 per cent to close at 79,223.11. During the day, it slumped 833.98 points or 1.04 per cent to 79,109.73.
The NSE Nifty tanked 183.90 points or 0.76 per cent to 24,004.75.
On a weekly basis, the BSE benchmark jumped 524.04 points or 0.66 per cent, and the Nifty climbed 191.35 points or 0.80 per cent.
"A sell-on-rally sentiment prevails in the market due to a strong US dollar, high valuation, and a shift towards a multi-asset investment strategy. Reducing US jobless claims and potential policy shifts in the US indicate that the Fed is not in a hurry to cut interest rates in the near term.
"Looking ahead, the market is likely to focus on Q3 earnings, with expectations of improvement in earnings on a QoQ basis," Vinod Nair, Head of Research, Geojit Financial Services, said.
From the Sensex pack, Zomato, HDFC Bank, Tech Mahindra, Adani Ports, Tata Consultancy Services, ICICI Bank, Sun Pharma, Larsen & Toubro, HCL Tech and ITC were the major laggards.
On the other hand, Tata Motors, Nestle, Titan, Hindustan Unilever and Reliance Industries were among the gainers.
"Despite the short recovery in the past two sessions, markets lost the momentum as there is still a lot of pessimism due to slowing growth, higher domestic valuations, foreign fund outflows, and uncertainty over US trade policies post Trump's resumption as the country's president. Hence, markets may see bouts of correction, and investors will continue to maintain caution while keeping an eye on global developments," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.
The BSE midcap gauge fell 0.33 per cent, and smallcap index dipped 0.02 per cent.
Among sectoral indices, BSE Focused IT declined 1.42 per cent, IT (1.31 per cent), teck (1.13 per cent), bankex (1.07 per cent), capital goods (1.06 per cent) and financial services (0.87 per cent).
BSE energy, telecommunication, consumer durables, utilities, metal and oil & gas were the gainers.
In Asian markets, Seoul and Hong Kong settled in the positive territory while Shanghai ended lower. Japanese markets were closed for the New Year holiday.
Markets in Europe were trading lower. US stocks were in the negative territory on Thursday.
"In the near term, we expect markets to witness stock/sector specific action on the back of pre-quarterly business updates released by companies, ahead of their Q3 results," Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd, said.
Foreign Institutional Investors (FIIs) turned buyers on Thursday after remaining net sellers in the recent past. They bought equities worth Rs 1,506.75 crore, according to exchange data.
The rupee dropped 4 paise to close at a record low of 85.79 (provisional) against the US dollar on Friday.
Global oil benchmark Brent crude declined 0.43 per cent to USD 75.60 a barrel.
In the previous session, the BSE benchmark jumped 1,436.30 points or 1.83 per cent -- its best single-day gain in more than a month -- to settle at 79,943.71. The Nifty surged 445.75 points or 1.88 per cent to 24,188.65.
"Reflecting on 2024, the year emphasised the importance of discipline over speculation. Despite pockets of volatility, markets did not see dramatic deviations. As broad-based rallies give way to more selective opportunities, the focus will shift to individual stock picks.
"Moving forward, staying disciplined about valuations and adhering to well-defined strategies will be crucial in navigating the ever-changing market landscape," Krishna Appala, Senior Research Analyst, Capitalmind Research, said.
