Value-buying in key blue-chips helped the index recover about 1,495 points to touch the day’s high of 27,397.38 before closing the session 338.61 points, or 1.23 per cent down, at 27,252.53.
The NSE Nifty, which dipped below the 8,100-mark, trimmed most of the initial losses and settled 111.55 points, or 1.31 per cent, down at 8,432. Intra-day, the index hit a low of 8,002.25 and high of 8,476.20.
Broader markets also performed weak with the BSE small-cap index falling 2.78 per cent and mid-cap down 2.03 per cent.
Among BSE sectoral indices, realty index fell the most by 10.23 per cent, consumer durables 4.18 per cent, IT 3.28 per cent and TECk 2.84 per cent. On the other hand, healthcare index was up 1.48 per cent, banking 0.18 per cent, PSU 0.1 per cent and oil & gas 0.02 per cent.
Real estate shares were among the biggest decliners, reflecting a belief that large amounts of black money are steered towards property transactions. The Nifty Reality index ended down 11.6 per cent, with DLF Ltd, India's biggest property developer, down 17.3 per cent.
But banking shares recovered from earlier falls with the Nifty Bank sub-index ending flat after earlier falling as much as 7 per cent as coffers are expected to swell when people start tendering their cash.
Sectors with exposure to the US economy were among the biggest decliners due to uncertainty about Trump's presidency. The Nifty IT index, which exports heavily to the United States, ended down 3.25 per cent.
Major Sensex losers were TCS (-4.93%), Maruti (-4.68%), Hero MotoCorp (-3.97%), M&M (-3,43%) and Adani Ports (-2.97%), while the top five gainers were Dr Reddy's(+5.04%), Sun Pharma (+4.07%), State Bank of India (+2.83%), Power Grid (+1.95%) and GAIL (+1.44%).
Foreign portfolio investors (FPIs) bought shares worth a net Rs 86.66 crore yesterday, as per provisional data.
Markets went off the rails as Sensex crashed 1,689 points and Nifty over 541 points in early session after a surprise Donald Trump win and the government’s move to withdraw high value notes, but managed to pull back towards the fag-end to close 339 points lower.
After opening lower at 26,251.39, the BSE benchmark Sensex continued free-fall in line with melting global stocks and cracked the 26,000-mark to touch a low of 25,902.45.
Investors' wealth wiped off
The overall investors’ wealth, measured in terms of valuation of all listed stocks, was down by nearly Rs 6 lakh crore in early morning trade from nearly Rs 111.44 lakh crore at the end of yesterday’s trade.
An estimated Rs 6 lakh crore got wiped off from the invested wealth within seconds of opening trade as Sensex plunged 1,689 points on the US election trends showing lead for Donald Trump and the withdrawal of high-denomination notes worth billions.
The bond yields fell as prices rose on a safe-haven bid and on hopes Prime Minister Narendra Lodi's withdrawal of higher value banknotes would ease inflation, raising the prospect of more rate cuts from the central bank.
“The impacts could be different depending upon sectors - deflationary in some while contraction in others. This is a short-term risk for the economy,” Samora Chakravorty and Anuran Aha, economists at Citi wrote in a note.
The rupee also lost value, but gold appeared to be a gainer as an investment option with sovereign gold bonds and gold- linked Exchange Traded Funds gaining ground as key non—cash instruments.
The rupee turmoil continued as it slumped further by 28 paise to 66.90 against the US dollar in morning deals on the government’s sudden action to ban on Rs 500 and Rs 1,000 currency notes in order to curb black money.
The domestic currency opened lower at 66.70 against yesterday’s closing level of 66.62 per dollar at the Interbank Foreign Exchange (Forex) market. Soon, it spiralled downward further and languished between 66.90 and 66.70 during morning deals. It was quoting at 66.78 at 11.58 am local time.
On Tuesday night, PM Modi had announced that Rs 500 and Rs 1,000 notes would be phased out for a few days and new notes in the same denominations will be introduced, in an effort to flush out hoarding of cash in higher denominations.
Real estate companies, understood to be the biggest beneficiaries of black money, have been taken to the cleaners by the market.
Nithin Kamath, Founder & CEO, Zerodha, "A couple of decades later, if one were to look back at the greatest economic moments of India, this would be one of them. The demonetization of 500 and 1000 Rupee notes will realign many things, right from the way we transact daily to real estate prices. This move once again proves that the government's intent and actions are in sync. Naturally, this will be great for the overall economy and the markets in general."
Dhiraj Relli, MD & CEO, HDFC Securities Ltd said "This is a logical next step in cleaning of the system and weeding out the black money. This will clean up the real estate sector and bring down the cost of doing business. This will put an end to any desire to generate black money. As there will be no motivation to generate black money, the economy will see more inflows and the GDP will go up. The move should also strengthen the rupee on a standalone basis , without taking into consideration the outcome of the US vote. The FIIs will like this and pump on more money. The rating agencies will soon have to go back to their desks to re-rate India.”