The Bombay Stock Exchange benchmark Sensex today rose to a nine-week high of 19,131.70 but later tripped by more than 220 points as investors sold blue chips, especially metal and mining stocks, on worries that the new mining draft would hurt corporate earnings.
Also, a likely Cabinet reshuffle next week dampened the sentiment.
The 30-share BSE index Sensex, which had gained 350 points in the previous session, closed down 220.26 points at 18,858.04 as metal, refinery and banking stocks suffered heavy losses in a volatile trading.
Similarly, the broad-based National Stock Exchange index Nifty ended 68.30 points lower at 5,660.65.
Brokers said metal and mining sector stocks sank on concerns that the proposed new mining policy would lower the earnings of companies such as Coal India and Sterlite Industries.
A Group of Ministers had yesterday approved the draft of Mines and Mineral Development and Regulation Bill, 2011, according to which coal miners will have to share 26 per cent of their profits with project-affected people.
Other resources mining companies would have to pay 100 per cent of the royalty on production to locals on the project site, as per the draft.
Coal India fell 8.18 per cent and Sterlite Industries lost 3.94 per cent to Rs 163.40. Hindalco dropped 3.73 per cent and Sesa Goa 4.17 per cent.
Metal sector index lost 2.99 per cent, FMCG index 1.14 per cent, Oil and Gas sector index 1.13 per cent and Banking index 1.11 per cent.
Market leader Reliance Industries dropped 1.83 per cent to Rs 854.40.