Monday mayhem: Sensex sinks another 290 pts

Banks were hit on concerns over mark-to-market losses on banks' portfolios, brokers said. Bucking the weak trend, software exporting companies led by Infosys rose over one per cent on hopes the fall in rupee would improve their revenues.

The rupee continued to slide through the day and touched yet another all-time low of 63.30 but ended marginally higher at 63.13 against the US dollar, recording the single biggest fall on a day in more than 10 years.

The fall in rupee value would mean further problems in controlling the widening current account deficit and would make goods across sectors from fuel to automobiles costlier.

"On the global front, US treasury yields are increasing, the US dollar is trading flat and locally, Indian bond yields are also increasing which indicates that currently the markets are quite directionless. This calls for a cautious approach," said Abhishek Goenka, Founder and CEO, India Forex Advisors.

Investors remained rattled after RBI on August 14 unveiled stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians, triggering talks of return of capital control regime. Sensex last Friday crashed by 769 points -- the worst fall in 4 years -- on fears that more steps will be announced to control capital outflows to shore up the unit.

Weakness in global markets and speculation over the US rolling back its economic stimulus package as early as next month also affected the sentiment.

Forex dealers said that overseas investors sat on the sideline on caution ahead of the release of the minutes of The Federal Open Market Committee on August 21. Axis Bank, IndusInd Bank, IDFC, Ambuja Cement, ICICI Bank, Bharti Airtel, Bank of Baroda, PNB, Sun Pharma and Bajaj Auto were the worst performers from the index pack.