Under pressure for the second straight session, the BSE Sensex fell over 91 points to crack below the 28,000-mark with investors adopting cautious stance after the appointment of Urjit Patel as the next RBI chief, who is very unlikely to cut rates in view of high inflation.
Besides, a weaker sentiment among Asian and European investors amid rising prospects for a rate hike by US Federal Reserve was also a reason behind the volatile domestic bourses. The rupee depreciating by 19 paise to trade at a fresh three-week low of 67.24 (intra-day) too negatively impacted market's mood.
The government on last Saturday announced the appointment of Urjit Patel as the next Reserve Bank Governor with effect from September 4.
Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services Ltd, said, "The Market fell, rupee weakened and bond yield rose amid the announcement of the new RBI Governor. The market believes that the prospect for a rate cut in the near-term is unlikely as the priority will be to contain inflation."
"Global market was volatile on concern over interest rate hike due to contradictory statement from the FED officials and the minutes," he added.
Beginning on a higher note at 28,088.07, the Sensex touched the day's high of 28,143.28 following selective buying by participants in bluechip stocks amid sustained foreign fund inflows.
However, the index later slipped into a negative terrain to slip below the 28,000-mark and touched a low of 27,918.05 before winding up at 27,985.54, a fall of 91.46 points or 0.33 per cent. This is the lowest closing since August 11.
The gauge had lost 46.44 points in the previous session on Friday after investors locked-in gains.
The NSE Nifty too remained under pressure for the better part of the session and finished 37.75 points, or 0.44 per cent, down at 8,629.15. Intra-day, it shuttled between 8,684.85 and 8,614.
Out of the 30-share Sensex pack, 19 scrips ended lower.
In the 30-scrip bundle, Lupin remained the worst-hit, down 2.03 per cent, followed by TCS at 2.02 per cent. Others laggards included Sun Pharma, Axis Bank, SBI, Maruti Suzuki, Tata Steel, Tata Motors, ONGC, Wipro, M&M, Adani Ports and ICICI Bank.
In contrast, Hind Unilever, ITC, HDFC Ltd, Coal India, Cipla, HDFC Bank, Bharti Airtel, Power Grid, L&T, GAIL and Dr Reddy's finished higher by up to 1.94 per cent and limited the fall.
Shares of India's largest power generation company state-owned NTPC Ltd fell 1.92 per cent despite the company reported 4 per cent rise in standalone net profit to Rs 2,369.53 crore for the first qaurter ended April-June.
Meanwhile, foreign portfolio investors (FPIs) bought shares worth a net Rs 409.94 crore last Friday, as per provisional data released by the stock exchanges.
Sector-wise, the BSE IT index suffered the most by falling 1.07 per cent, followed by teck 0.90 per cent, auto 0.89 per cent, healthcare 0.73 per cent, metal 0.63 per cent, power 0.54 per cent, banking 0.54 per cent, PSU 0.50 per cent and oil&gas 0.44 per cent.
The broader markets were also lower with the BSE mid-cap index ending 0.42 per down while the small-cap shed 0.14 per cent.
Elsewhere, key indexes in Asia, like Shanghai Composite Index moved down by 0.75 per cent, Singapore fell 0.31 per cent, while Japan's Nikkei and Hong Kong's Hang Seng ended higher by up to 0.32 per cent.
In Europe, France, Germany and the UK based indexes fell by up to 0.30 per cent in their opening trade.
Globally, trading sentiment was dampened after the US Federal Reserve's vice chairman, Stanley Fischer, said the country's economy was picking up, thus raised expectations for an interest rate hike this year.