The Sensex and Nifty tanked, dragged by energy stocks such as HPCL and ONGC on rising concern that the government may ask state-owned oil firms to share the burden of higher petrol and diesel prices.

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The broader Nifty closed 1.01 per cent or 106 points lower at 10,430.35, while the benchmark Sensex fell 0.88 per cent or 306 points to 34,344.91. Both the indices fell over 1 per cent, extending losses in the last hour of trading.

In the broader market, the BSE Midcap and the BSE Smallcap indices slipped 0.2 per cent and 0.4 per cent, respectively. Market breadth, indicating the overall health of the market, turned negative. On the BSE, 1,544 stocks dipped, 1,110 stocks gained, while 123 stocks remained unchanged. 

"Market edged lower amid pessimism on global trade talks and below par fourth quarter earnings.  Metals sank while PSU bank outperformed and prevented the market from a nose dive correction. Investors expect that the worst is over related to PSU banks NPA with adequate provisions and expectation of recapitalization from govt. On the other hand, rupee continued to fall and the fear of inflationary pressure may lead the market to consolidate," said Vinod Nair, Head of Research, Geojit Financial Services.

State Bank of India, NTPC, Larsen & Toubro and Tata Motors were the major gainers on Sensex, while Tata Steel, ONGC, Dr Reddy's and IndusInd Bank shed the most. 

On the Nifty, HPCL, Vedanta, Tata Steel and BPCL were the top losers. Hindustan Petroleum declined nearly 8 per cent, while ONGC dropped 5.3 per cent.

Vedanta fell 6.4 per cent to its lowest close since June 30, 2017 on reports that nine people were killed in police firing after protests against the closure of Vedanta group's Sterlite Copper plant turned violent in Tamil Nadu's Tuticorin.

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Among gainers, Cipla share price surged nearly 7 per cent on Wednesday after the pharma major reported a net profit of Rs 179 crore for the quarter ended March on improved sales in the domestic market and South Africa. The drugmaker had posted a net loss of Rs 62 crore in the same quarter last year. Reacting to positive earnings, the stock gained as much as 6.78 per cent to Rs 562.50 on the BSE. The scrip settled at Rs 532.75, up 1.6 per cent.

On Tuesday, foreign portfolio investors (FPIs) sold shares worth a net Rs 1,651.63 crore while domestic institutional investors (DIIs) bought shares worth Rs 1,496.83 crore, as per provisional data.