At an appearance before an economic group on Wednesday, she said she is "looking forward" to an interest rate hike, which sparked concerns about capital outflows from emerging markets.
Mood remained downbeat after a monthly survey showed that services sector output stagnated in November after four straight months of expansion.
The BSE Sensex touched a low of 25,857.35 before settling at 25,886.62, a fall of 231.23,or 0.89 percent -- its biggest single-day drop since November 18. The gauge had lost 51.56 points in the previous session.
The 50-share NSE Nifty went below the crucial 7,900-mark and closed lower by 67.20 points, or 0.85 percent, at 7,864.15. It shuttled between 7,853.30 and 7,912.30 during the day. ONGC tanked the most, with a fall of 2.65 percent, followed by Lupin and BHEL.
Moreover, Vedanta Ltd, ITC, M&M, Tata Motors, Hero MotoCorp and ICICI Bank were down by up to 2.23 percent. Stocks of IT and auto came under selling pressure as incessant rains in Chennai and other parts of Tamil Nadu hit their operations hard. Overall, 25 fell among 30-share Sensex constituents.
Sectorwise, BSE FMCG suffered the most plunging 1.48 percent, followed by consumer durables, metal, PSU and healthcare. In step with the overall trend, the small-cap index fell 0.50 percent while the mid-cap index shed 0.42 percent as investors reduced their bets.


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