"The market is fearing that inflation is not going to come under control soon whereas a tight monetary policy may cause a recessionary situation," said Santosh Meena, Head of Research at Swastika Investmart.
Sensex closed at 51,495.79 points, down 1,045.60 points, or 1.99 per cent, whereas Nifty closed at 15,360.60 points, down 331.55 points, or 2.11 per cent.
The decision by the US Federal Reserve to raise the interest rate by 0.75 percentage points, the highest on-shot increase since 1994, to tackle inflation that is at its highest in 40 years, also weighed on the stocks.
The rate hike was announced at the end of the two-day policy meeting of the Fed. It ran contrary to smaller rate hikes of 0.50 percentage points that had been indicated by several members of the US Fed's top decision making committee, the Federal Open Market Committee.
New Delhi, June 16
Domestic equity benchmark indices declined as the day progressed and settled sharply lower on Thursday as investors evidently feared a looming recession.
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