Indian shares posted their biggest one-day drop in over two weeks on Thursday, snapping a three-session winning streak, as concerns of a prolonged high-interest rate regime weighed on sentiment.

The Nifty 50 index closed 0.93 per cent lower at 17,589.60, while the S&P BSE Sensex ended down 0.90 per cent at 59,806.28, notching their worst day since Feb. 22.

The domestic equities finally gave in to the pressure of worries that the Federal Reserve and other major central banks will continue to raise rates higher and for longer.

Twelve of the 13 major sectoral indexes declined, with the heavyweight financials and information technology (IT) indexes losing 0.75 per cent and 1.08 per cent, respectively.

IT stocks, in particular, are sensitive to rate hikes in the United States and Europe where a majority of their clients are based.

Analysts expect the Nifty 50 to trade in a narrow range until the Fed's policy decision on March 22, at which it is expected to raise rates by 50 basis points.

"A 50 bps rate hike in the next Fed meeting is a given. With further rate hikes, debt will become more attractive," said G Chokkalingam, founder and chief investment officer at Equinomics Research.

"Investors will wait for the monsoon forecast, rate hike trajectory, revival in domestic corporate earnings and growth figures before they turn definitively turn positive on the Indian markets."

Meanwhile, the metal index was the only bright spot, advancing 0.06 per cent on hopes that the reopening of the Chinese economy would boost demand.

Tata Steel, Hindalco and JSW Steel were among the top gainers in the Nifty 50.

They were joined by Bharti Airtel, which rose 0.78 per cent after brokerage CLSA projected a 3 per cent increase in average revenue per user (ARPU) due to a 57 per cent hike in its entry-level tariff plans.

Reliance Industries led the Nifty 50 losers with a drop of 2.4 per cent on multiple block deals.

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