Sustained foreign fund outflows caused further volatility. A total 11 out of 12 BSE sectoral barometers ended in the red. Besides oil and gas, realty, IT, power and auto sectors logged sharp losses.

Advance to decline ratio favoured laggards as 1,750 stocks fell, 1,139 rose and about 100 ended flat. In addition, a depreciating rupee that weakened by over 30 paise, or 0.50 per cent, to almost nine-month low of 62.34 (intra-day) against the dollar also had an impact on stocks.

The 30-share BSE Sensex, after dipping to a low of 27,539.47, finally settled 229.09 points, or 0.82 per cent, down at 27,602.01 -- its lowest closing since October 30.

The gauge had gained 34.09 points in yesterday's volatile session, snapping a three-day falling trend.

The 50-share NSE index Nifty cracked the crucial 8,300-mark by falling 62.75 points, or 0.75 per cent, to close at 8,292.90 also its weakest close October 30.

"Weak Asian markets and fresh fears from Euro region kept Indian markets volatile. Mixed sentiments on the back of weak rupee and lower oil too added to the volatility. FII liquidity outflow on the back of profit booking too added to weakness," said Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

Besides, investors were cautious ahead of the release of Consumer Price Index-based inflation and Index of Industrial Production scheduled on Friday, according to Jayant Manglik, President - Retail distribution, Religare Securities.

Brent crude for January settlement dropped by USD 2.60 to a fresh five-year low of USD 64.24 per barrel on the New York Mercantile Exchange in yesterday's trade.

Asian markets sank again after Wall Street was hit by a further fall in oil prices, while the dollar rose against yen.

Sectorwise, BSE Oil & Gas index suffered the most as it lost 2.48 per cent, followed by Realty index 2.03 per cent, IT index 1.18 per cent and Power index 1.03 per cent among others. The BSE Healthcare index, however, rose 0.30 percent.

Meanwhile, Foreign Portfolio Investors bought shares worth net Rs 5.39 crore yesterday as per provisional data.

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