The Nifty's state-run bank index closed down 2.7% with all 10 constituents in the red. State Bank of India was the top loser on the indexes, finishing the session with a more than 3% fall. Shares of Jammu and Kashmir Bank Ltd settled 5.75% lower. Reliance Industries Ltd and ITC Ltd were among the top non-financial losers on the indexes. Both stocks shed over 2% on Thursday. Meanwhile, the blue-chip Pharam index settled 2.25% higher, with shares of Sun Pharmaceutical Industries Ltd closing at its highest in over two weeks.
Domestic investors also remained cautious ahead of GDP data for the April-June quarter due on Friday. "Sentiment is a fair worry, consumer and business sentiment has to change," said Sunil Sharma, chief investment officer at Sanctum Wealth Management in Mumbai.
The weather office on Wednesday said monsoon rains in India were below average for the first time in five weeks in the week through Wednesday, further dampening spirits.
Monsoon rains are key to farm output and economic growth as the agricultural sector accounts for about 15% of India's $2.5 trillion economy.
Indian markets are likely to see some volatility ahead of August derivative contracts' expiry. Shares of Indiabulls Housing Finance Ltd slipped as much as 7.97%, the stock will not be included on the Nifty 50 NSE index from Sept. 27. Only 10 of the 50 stocks on the NSE blue-chip index were trading in postive territory.
Meanwhile, sugar producers like E.I.D.-Parry (India) Ltd gained as much as 2.45% and Rana Sugars Ltd surged 6.98% after India's cabinet approved incentives of 62.68 billion rupees ($876.74 million) to help cash-strapped mills to export 6 million tonnes of sugar in the 2019/20 marketing year starting from Oct. 1.