Sensex posts biggest loss in 2017, cracks 364 pts as GST jolt drags ITC 13%

S Krishna Kumar of Sundaram Mutual Fund said the research house did not see any significant correction but the uptrend from hereon could be a lot slower.

"We believe that markets would continue to be positively biased. We believe the domestic savings is channelling itself into the markets given that the expectations on returns post tax are just about 10-12 percent which should be a very comfortable number. So a lot of money is coming into domestic markets to support. So that is not a big worry," he reasoned.

According to him, the only point of caution would be that money flow, which comes into the secondary markets, could be much more muted than the last 12-18 months, due to likely lot of fund raising. The next 12 months could see about Rs 1-1.5 lakh crore of primary issuances, which would sponge out significant portion of the money coming into the markets, he feels.

The market already moved up more than 21 percent (till Monday) in the current calendar year, so the second half could be a lot softer than the first half in terms of returns, Kumar said.

The broader markets also caught in bear grip, though outperformed benchmarks. The BSE Midcap and Smallcap indices were down 0.6 percent each on weak market breadth. About 1,688 shares declined against 1,000 advancing shares on the exchange.

ITC crashed 12.6 percent amid high volumes as brokerage houses downgraded the stock after the GST Council on Monday decided to increase cess on cigarettes.

Morgan Stanley downgraded the stock to equal-weight from overweight and reduced target price to Rs 285 from Rs 395, saying it is a clear negative with obvious impact on volume growth and valuation multiples. It expects 3 percent volume decline in FY18 versus earlier estimate of 5 percent growth and expects 6 percent cigarette business EBIT growth versus 20 percent earlier.

Its peers Godfrey Phillips India and VST Industries were also down nearly 6 percent and 8 percent, respectively.

Reliance Industries shares snapped its 11-day winning streak, down 2 percent on profit booking.

Hindustan Unilever was up 0.5 percent ahead of earnings that announced after market hours. The FMCG major beat analysts' earnings expectations on all counts as profit grew by 8.5 percent and EBITDA margin expanded by 160 basis points despite flat volume growth.

UltraTech Cement was down 0.7 percent on profit booking after stable earnings in June quarter. Profit grew by 15 percent to Rs 891 crore and operating income increased 10 percent YoY.

State Bank of India, HDFC, ICICI Bank and Kotak Mahindra Bank fell moderately in later part of the session whereas Asian Paints, Axis Bank, Sun Pharma, ONGC and BHEL outperformed with 1-2 percent gains.

Jubilant Foodworks rallied 4 percent as investors cheered the largely positive review of the earnings by global brokerage houses.

European markets were lower with global sentiment dampened by a gridlock in US politics over healthcare reform. France's CAC was down 0.7 percent and Germany's DAX fell 0.9 percent at the time of writing this article. Asia ended mixed.