The volatility index surged to 16.31, the highest since Feb. 1, the day of the union budget.
Two of the 13 major sectoral indexes fell, with metals leading losses and shedding nearly 3%.
The Nifty 50 has fallen 4.4% in the past five sessions, while the Nifty financials index slid 5.3%. The sentiment in the market was dented by fears of contagion in the global financial sector after Credit Suisse's biggest shareholder said it could not provide the Swiss Bank with more funding. Credit Suisse stock plunged as much as 30% to a record low overnight. However, by the end of the day, Switzerland's central bank had pledged to fund the company.
While there is no material impact on Indian markets due to Credit Suisse, the sentimental impact is obvious, three analysts said. "Whenever a bank opts for emergency funding it means things are really bad, as an emergency fund is the last resort," said Avinash Gorakshakar, head of research at Profitmart Securities.
Gaurav Dua, head of capital market strategy at Sharekhan asked investors to reduce exposure to banks and increase allocations to public sector enterprises due to their attractive valuations and higher dividend yield.
Among individual stocks, Patanjali lost nearly 5% after exchanges froze certain promoters shares. Titan jumped nearly 2% and was among the top Nifty 50 gainers after global brokerage firm JP Morgan termed it the preferred discretionary play.
($1 = 82.8800 Indian rupees) (Reporting by Nishit Navin and Bharath Rajeswaran in Bengaluru; Editing by Savio D'Souza and Janane Venkatraman)
