The Bombay Stock Exchange (BSE) 30-share prime index, the Sensex, on Monday, weathered early losses of nearly 4 percent to end down 0.32 percent or 51.80 points at 15,923.72.

The benchmark index closed at 15,923.72 - its lowest close since mid-September, despite 16 components ending in the green. During intraday trade, the key index had plunged to the day's low of 15,362.17 or as much as 3.8 percent and saw a high of 15,998.33 points.

The biggest loser was engineering and construction major and Sensex heavyweight Larsen & Toubro (L&T) which lost as much as 12.5 percent before ending down 8.7 percent at Rs.2,728.80, its lowest in nearly six months, as news spread that L&T has taken a Rs.200 crore hit on commodity hedging deals transacted by its Sharjah-based subsidiary and Morgan Stanley cut its share price estimate on the company.

The stock has lost nearly 35 percent this year.

BHEL lost 5.69 percent to Rs.1,910.40 and Maruti Suzuki declined 4.25 percent to finish at Rs.893.45.

Satyam Computer Services dropped 3.4 percent to Rs.409.

Wipro was down nearly 3 percent to Rs.403. ICICI Bank and HDFC shed 2.5 percent each at Rs.871 and Rs.2,565, respectively.

TCS declined nearly 2 percent to Rs.830. Hindustan Unilever Ltd (HUL) dropped 1.5 percent to Rs.223.

Bharti Airtel was the top gainer of the day, ending up by 6.85 percent at Rs.803. Other gainers included Tata Steel (up 5.13 percent at Rs.812), Bajaj Auto (up 5.07 percent at Rs.1,985) and ACC Ltd (up 4.39 percent at Rs.767).

DLF gained 3.44 percent at Rs.680 and Reliance Communications rallied 2.78 percent to Rs.558.

State Bank of India (SBI) rose 2.20 percent to Rs.1,882 and HDFC Bank advanced 1.91 percent to Rs.1,311.

Ambuja Cements and ONGC moved up over 1 percent each to Rs.120 and Rs.968, respectively.

Reliance Industries Ltd (RIL) was up 1.09 percent at Rs. 2,273.

Cipla (up 0.48 percent), Hindalco (up 0.41 percent), Mahindra & Mahindra (up 0.37 percent), Tata Motors (up 0.33 percent) and NTPC (up 0.30 percent) also ended in the green.

Among the sectoral indices, BSE Capital Goods index was the worst hit, plunging by 684.03 points at 13,341.09. BSE Realty index lost 76.62 points to close down at 7705.66. BSE Consumer Durable index fell by 118.37 points at 4145.34 and BSE Bankex fell by 38.47 points at 8438.99.

The BSE IT index (down 1.86 percent), BSE FMCG index (down 0.79 percent), BSE HealthCare index (down 0.74 percent) and BSE Power index (down 1.36 percent) ended in the red.

The BSE Metal index (up 2.24 percent), BSE Oil & Gas index (up 2.02 percent), BSE Auto index (up 0.42 percent), BSE PSU index (up 0.45 percent) and BSE TECk index (up 0.59 percent) ended in the green.

The BSE Midcap and Smallcap indices ended in the red, closing down 0.54 percent and 1.91 percent at 6767.92 and 8248.73 points respectively.

The BSE market breadth was overall negative as 1,915 shares declined, 749 advanced and 44 remained unchanged.

The broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) fell to a low of 4,620.50 and rose to a high of 4,814.95 points before ending in the green 0.6 percent or 38.80 points above at 4,800.40.

Everything is happening at the same time, there is bad news from the United States and back home we have inflation and offloading by foreign investors, said Neeraj Dewan, director with Quantum Securities in New Delhi.

Market expectations of a rate cut are drying up because of the rise in inflation, he said.

For the first time in 10 months, inflation breached the 5 percent-mark to touch 5.02 percent during the week ended Feb. 23 and spoiled the chances of the Reserve Bank of India (RBI) indicating any rate cuts in its April policy meet.

If anything, bad news just doesn't appear to stop at the moment. The next big trigger is the March 18 meeting of the US Federal Reserve, brokerage India Infoline said in a client note.

It is likely that Fed may act before March 17 as the dollar is trading weak, said Amitabh Chakraborty, head, equity at Religare Securities.

Global economies are heading for a recession and that is impacting the Indian markets, said Rajnish Rangari, country head (investment banking), Karvy Investor Services Ltd.

Foreign funds have been net sellers of $3.4 billion of shares so far this year, after buying a record $17.4 billion in 2007.

Currently we are in the middle of all negative news, which is making the downside sharp. Negative cues are coming from the global markets and here nuclear deal is again in the limelight, said Dipak Acharya, a fund manager with BoB Mutual Fund.

India's communists, formidable allies of the ruling government, have been opposing a nuclear deal with the US and have threatened to withdraw support if the government moves ahead with the pact.

Madhusudan Kela, chief of Reliance Mutual Fund, said stock prices at current levels looked attractive. But, it is difficult to predict the bottom, he added.

In the near future, all depends on the state of global markets. It is difficult to predict the direction of the market in the short-term, said Birla SunLife Mutual Fund's equity investments co-head Ajay Argal.

Morgan Stanley's managing director Ridham Desai said the technical position of the market combined with the purging of speculative activity also does not favor the market.

Global risk aversion is rising, and India's high-beta (high volatility) characteristic is showing up in the worst possible manner, he said in a report.

Desai, however, does not think investors should despair. The policy environment, coupled with return and valuation dispersion and earnings prospects, implies that there are still stocks and sectors to buy. The earnings downside seems concentrated in financials, industrials, materials, telecom, and utilities based on a comparison of EBITDA margins, RoE and consensus growth expectations versus historical averages, said Desai.

Elsewhere in the region, Karachi's 100-Share index fell 1.14 percent to 14,913.29 while Colombo's All-Share index ended flat.

Asian markets, barring Hong Kong's Hang Seng, closed in the negative zone on news of unexpected job cuts in the US in February, which raised concerns that the world's largest economy may be in recession.

European markets, which opened after Indian market, recovered after weak opening. Key benchmark indices in United Kingdom (up 0.19 percent to 5,710.70) and France (up 0.09 percent to 4,623.32) rose.

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