The benchmark BSE Sensex today plunged by 245 points to 26,523.09 — its lowest in nearly eight months — on heavy selling in consumer durables and metal stocks amid prevailing drought fears and RBI’s cautious stance on economic recovery.

The sentiment was also hit after a better-than-expected US jobs data raised fears that the Federal Reserve will raise interest rates this year.

More sales of German government bonds weighed on European stock markets on Monday, while the dollar retreated after a report - later denied - that President Barack Obama had expressed concern over its strength after a year-long rally.

Caution ahead of a host of macroeconomic numbers such as IIP and inflation data, to be released this week, also hit the domestic sentiment, traders said.

The 30-share BSE index Sensex plunged 245.40 points or 0.92 per cent at 26,523.09 and the 50-share NSE index Nifty shed 70.55 points or 0.87 per cent at 8,044.15.

All BSE sectoral indices ended significantly in the red. Among them, consumer durables fell the most by 1.94 per cent, followed by metal 1.73 per cent, oil & gas 1.55 per cent and FMCG 1.52 per cent.

Top five Sensex gainers were Tata Power (1.13%), Axis Bank (+0.92%), Bajaj Auto (+0.76%), TCS (+0.24%) and M&M (+0.15%), while the major losers were VEDL (-3.12%), Tata Steel (-2.64%), Reliance (-2.3%), Hero MotoCorp (-2.24%) and Sun Pharma (-2.21%)..

FII selling

Foreign institutional investors have sold in three of the last four trading sessions, withdrawing about $210 million from Indian equities, regulatory and stock exchange data showed.

Overseas funds had withdrawn Rs 5,700 crore ($889.9 million) from equity market last month, when markets were gripped by worries about a potential retrospective minimum alternate tax (MAT).

"Largely, the exit is being taken by some of the global traders due to a lot of uncertainty about the monsoon rains, which is being worsened by negative sentiment due to tax worries and slow pace of reforms," said Deven Choksey, managing director at K R Choksey Securities.

A report by SMC Investments and Advisors said: "Asian stocks traded lower across the board early today, with investors reacting to key economic data from the region. The US stock market closed mostly lower Friday as an upbeat jobs report lifted expectations for an interest-rate hike this fall."

Global markets

European shares fell on Monday, weighed down by a drop in agrochemicals group Syngenta although Deutsche Bank outperformed to surge higher after boardroom changes.

Bid speculation also lifted the shares of drinks group Diageo and Swiss biotech company Actelion, following reports that Shire might bid for Actelion and that a Brazilian billionaire was eyeing Diageo.

The pan-European FTSEurofirst 300 index fell 0.3 per cent, while the euro zone's blue-chip Euro STOXX 50 index also retreated 0.4 per cent.

Asian shares extended losses on Monday as weak Chinese imports increased concerns over a slowdown in the world’s second largest economy, while the dollar was steady after US jobs data raised chances for a US interest rate hike as early as September.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent, while Japan’s Nikkei stock index recovered from early lows but still ended down slightly.

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