Mumbai: The Bombay Stock Exchange benchmark Sensex on Wednesday dropped to more than two-year low, down 365 points, as investors squared positions ahead of the monthly settlement in derivative contracts amid heavy fund outflows and weak global markets.

Sensex, which gained 119 points on Tuesday, fell 365.45 points to 15,699.97 - level seen on November 3, 2009. It had touched a low of 15,478.69 before the partial recovery. Before Tuesday's gain, the market had lost nearly 10 per cent in eight straight sessions.

The broad-based National Stock Exchange index Nifty tumbled 105.90 to 4,706.45, after touching 4,640.95.

Brokers said investors sold heavily while clearing pending positions ahead of Thursday's settlement in this month's derivative contracts and weak cues from Asian and European equities markets.

IT, industrial and financial stocks led the slide on weak global trend as the US economy expanded at a rate below market expectations during the third quarter, they added.

The overall market fall was cushioned somewhat as shares of telecom operator RCom and real estate firms DB Realty and Unitech recovered after the Supreme Court granted bail to their executives in the 2G spectrum case.

Asian stocks fell after China's manufacturing survey showed weakness and the US logging below-expected economic growth. The US Commerce Department cut its estimate of this year's third-quarter growth to 2 percent from 2.5 pc earlier.

Key indices in China, Hong Kong, Singapore, South Korea and Taiwan fell by up to 2.77 percent. Japanese market was closed. European markets were down in the afternoon trade, with the CAC, DAX and the FTSE down by up to 0.7 percent.

Back home, major losers were Jaiprakash (5.05 pc), HDFC Bank (3.85 pc), Bharti Airtel (3.70 pc), BHEL (3.58 pc), Wipro (3.17 pc), Larsen (2.85 pc), Jindal Steel (2.83 pc), RIL (2.68 pc), Infosys (2.67 pc), Tata Power (2.61 pc), ICICI Bank (2.53pc), DLF (2.47 pc), Tata Motor (2.38 pc), Tata Steel (2.21 pc), ONGC (2.20 pc), HDFC (2.10 pc), TCS (2.04 pc), SBI (2.03 pc), M&M (1.98 pc), Hindalco (1.89 pc) and ITC (1.66 pc).

Among the sectoral indices, the BSE-Capital Goods plunged 3.04 percent, Teck (2.65 pc), IT (2.48 pc), Oil & Gas (2.41 pc), Bankex (2.40 pc), Power (2.15 pc) and Metal (2 pc).

The total market breadth remained negative with 2,054 stocks losing ground, as against 761 ending with gains. The total turnover was relatively up at Rs 2,011.32 crore from Rs 1,973.95 crore on Tuesday.

FII pullout cause of market crash: FM

Finance Minister Pranab Mukherjee on Wednesday attributed the stock market crash to withdrawal of funds by foreign investors and depreciation of the rupee.

"Markets have crashed because of continuous withdrawal of (funds by) FIIs. There is still uncertainty prevailing in the Eurozone. Rupee depreciation also has adverse impact. All these cumulative effects are there," he told reporters here.

He said this while responding to questions on sharp plunge in the stock markets. During the intra-day trade, the BSE Sensex crashed by 587 points, but recovered later.

Value of the Indian Rupee had touched an all-time low of 52.73 against the US dollar on Tuesday.

Foreign Institutional Investors (FIIs) have withdrawn Rs 2,352 crore from the equity market, between November 16 and November 22 this year, adding to the woes of stock markets.

The BSE benchmark Sensex tumbled by 587 points in the first half of trade on Wednesday, dipping below the 15,500-mark at mid-session, on account of heavy selling.

The wide-based National Stock Exchange Nifty index was also down by 171.40 points at 4,640.95 at 1230 hours.

Besides other things, fresh concerns about the health of the global economy, following downward revision of the US growth rate in the third quarter of 2011, also dampened confidence of investors.