Equity indices relinquished early gains to close in the red for the second straight session on Thursday as surging oil prices amid the ongoing conflict between Russia and Ukraine sapped risk appetite.
Crude oil prices ratcheted up towards the USD 120 per barrel mark on fears of supply disruptions as western nations tightened sanctions on Russia, which accounts for around 10 per cent of global oil output.
A weakening rupee and persistent foreign fund outflows also weighed on sentiment, traders said.
The 30-share BSE Sensex started the trade on a firm footing and jumped 527.72 points in morning deals to a high of 55,996.62. However, during the afternoon session it surrendered all its early gains and finished at 55,102.68, down 366.22 points or 0.66 per cent.
In similar fashion, the broader NSE Nifty declined 107.90 points or 0.65 per cent to close at 16,498.05.
UltraTech Cement was the biggest drag among the Sensex components, tumbling 6.47 per cent, followed by Asian Paints, Dr Reddy's Laboratories, Maruti Suzuki India, Hindustan Unilever Limited and ICICI Bank.
In contrast, PowerGrid, Wipro, Tech Mahindra, HCL Tech, ITC, Tata Steel and Infosys were among the prominent gainers, climbing as much as 3.34 per cent.
"Domestic equity markets closed lower as the geopolitical scenario continue to worsen due to the Russia-Ukraine crisis. Soaring crude prices due to supply disruptions from Russian sanctions have further escalated the situation," according to Mitul Shah, Head Of Research at Reliance Securities.
Vinod Nair, Head of Research at Geojit Financial Services, said release of strategic reserves of oil in India and abroad along with increased output from OPEC is expected to ease crude prices in the future.
"Additionally, the Indian market will look at the state elections exit poll data while the global market will track war developments, BoE and Fed policy meeting status from next week," he noted.
Among sectors, BSE auto dropped the most at 2.24 per cent, followed by consumer discretionary goods and services, bank and capital goods, while utilities, power, and oil and gas mustered gains.
The BSE midcap and smallcap indices ended on a mixed note.
International oil benchmark Brent crude surged 2.75 per cent to USD 116.03 per barrel.
Bourses in Hong Kong and Tokyo settled with gains, while Shanghai was marginally lower.
Stock exchanges in the US closed in the positive territory in the overnight session. European markets were mostly lower in the afternoon session.
The rupee declined by 16 paise to close at 75.96 against the US dollar on Thursday.
Foreign institutional investors continued their selling spree in Indian markets as they offloaded shares worth Rs 4,338.94 crore on a net basis on Wednesday, as per exchange data.
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