MUMBAI: Benchmark indices reeled under pressure after the Republic Day holiday on hawkish comments by the US FOMC, which resulted in FII liquidating their holdings.
The Nifty and Sensex were down 2% each at 16940 and 56701 in early noon trades. Midcap and small-cap indices also traded down by 2% each.
IT-led the decline with Infy, TCS, Wipro and Tech M, HCL Tech and Mphasis languishing in the red. Realty and consumer durables also bore the brunt of selling.
The only refuge was the Nifty PSU bank space which was up 1.5%. Canara Bank, Punjab Sind Bank, Union Bank and Bank of Baroda led the gains.
Thursday is expected to witness high volatility given its monthly expiry with traders rolling over their futures positions to the February series.
The fear and uncertainty in the market were reflected by fear gauge India Vix, which was up 6.6% at 22.7. A reading above 18 spells increased uncertainty.
FIIs have sold Rs 15766 crore in the month through January 25 and Rs 45757 in the fiscal year so far.
Increasing interest rates in the US, reduce the returns from carry trades from EMs like India, given weakening currencies such as rupee.