MUMBAI:The BSE Sensex slumped more than 2 percent to its lowest since May 2014 and headed for a fourth consecutive session of losses on Thursday after U.S. Fed Chair Janet Yellen kept options open for more rate hikes while State Bank of India fell after posting disappointing earnings.
Yellen told Congress she does not expect to reverse the rate hike program that began in December but said she saw risks to the U.S. economy.
Weaker global markets have hit Indian shares this year, with the broader Nifty down around 10 percent, compared with a fall of around 11 percent in the MSCI's Asia-Pacific index excluding Japan.
Analysts say sentiment remains week, given concerns about earnings, including SBI on Thursday. Foreign investors have sold a net $1.9 billion in Indian shares so far this year.
"This pressure is likely to continue. We are not expecting a solid recovery. There may be sharp downgrades coming after the results in FY17," said Daljeet Kohli, director and head of research at IndiaNivesh Securities.
"If the Budget is able to show some direction on how the demand will be created, a bounce-back can sustain."
The Nifty fell 2 percent to below 7,100 points for the first time since May 2014.
The benchmark Sensex was also down 2 percent.
Blue-chips were among the leading losers, with cigarette maker ITC Ltd down 2.7 percent and Housing Development Finance Corp lower 1.3 percent.
Cement maker ACC Ltd fell 2 percent after posting an about 68 percent fall in consolidated net profit for the October-December quarter, prompting Deutsche Bank and HSBC to cut their target prices.
Meanwhile, State Bank of India gave up earlier gains of as much as 5.3 percent to fall 2.5 percent and hit its lowest since March 2014 after reporting a worse-than-expected 62 percent fall in quarterly profit, although its bad loans rose less than forecast.