The market witnessed massive selling on the back of negative news from the banking sector and closed lower for the fifth straight trading session.
The Sensex fell 429.58 points, or 1.27 per cent to settle at 33,317.20 while the Nifty fell 109.60 points, or 1.06 per cent, to 10,249.25. The Sensex closed below the 34,000 level.
Key indices plunged sharply. The BSE Mid-Cap fell 0.84 per cent and Small-Cap, 1.32 per cent.
Among the sectoral indices, the BSE Realty was down 2.21 per cent, followed by Telecom (-1.68), Bankex (-1.44), Auto (-1.36), Finance (-1.35), Industrials (-1.34) and Capital Goods (-1.31).
Mustafa Nadeem, CEO, Epic Research, said: “A flag pattern breakout is seen on the daily chart. It is a continuation pattern, out of which we have seen a breakout in a favourable direction of the previous swing and is bearish. The flag pattern is a very reliable and it indicates the momentum may continue, as we have mentioned earlier, towards a deeper cut in prices.
Secondly, the Nifty has been below its short-term moving averages and this time it is below its crucial 100 days moving average. Thirdly, we also see two heavyweight sectors like banking and metal in stress due to recent news flow. The currency market is showing a weakness in the rupee, which will further aid the overall bearish scenario in the coming sessions.
Rusmik Oza, head-Midcaps, Kotak Securities, said: "The market correction was led by sharp reversal in the banking stocks after the SFIO summoned two private sector banks with regard to the PNB case.
FIIs have been net sellers for a long time but today (Tuesday) after a long time we saw DIIs also turn net sellers, which aggravated the sell-off.
The Nifty broke the key support levels of 10,300 where it had taken support last time. Break down of key technical levels and selling by DIIs are the key reasons for the sharp market correction.”