Key benchmark indices dropped sharply led by profit selling in index pivotals. Negative global stocks weighed on the domestic bourses. Investors were also cautious before corporate results begin to roll in next week. The Sensex settled below the psychological 36,000 mark. The Nifty settled below 10,800 mark.

The Sensex fell 363.05 points or 1% to settle at 35,891.52, its lowest closing level since 27 December 2018. The index fell 17.87 points, or 0.05% at the day's high of 36,236.70. The index fell 520.56 points, or 1.44% at the day's low of 35,734.01.

The Nifty 50 index fell 117.60 points or 1.08% to settle at 10,792.50, its lowest closing level since 27 December 2018. The index fell 14.75 points, or 0.14% at the day's high of 10,895.35. The index fell 175.05 points, or 1.60% at the day's low of 10,735.05.

Volatility was high. Trading for the day began on a subdued note as the key benchmark indices drifted lower in early trade on negative Asian stocks. Key indices cut losses in morning trade. Stocks once again turned weak in mid-morning trade after latest data showed that manufacturing activity slowed in December. Shares extended intraday fall in early afternoon and afternoon trade. Indices hit intraday low in mid-afternoon trade. Stocks cut losses in late trade.

The S&P BSE Mid-Cap index dropped 1.26%. The S&P BSE Small-Cap index fell 0.74%.

The market breadth, indicating the overall health of the market, was weak. On the BSE, 950 shares rose and 1601 shares fell. A total of 166 shares were unchanged.

Among the sectoral indices on BSE, the S&P BSE Metal index (down 3.45%), the S&P BSE Auto index (down 3.01%) and the S&P BSE Consumer Discretionary Goods & Services index (down 1.83%), underperformed the Sensex. The S&P BSE IT index (up 0.28%), the S&P BSE Teck index (up 0.03%) and the S&P BSE Healthcare index (down 0.54%), outperformed the Sensex.

Tata Steel (down 4.21%), Mahindra & Mahindra (down 4.15%), Maruti Suzuki India (down 2.74%), Bharti Airtel (down 2.21%) and Adani Ports & Special Economic Zone (down 2.02%), were the major Sensex losers.

Sun Pharmaceutical Industries (up 1.66%), TCS (up 1.09%), Asian Paints (up 0.71%), Infosys (up 0.70%), Yes Bank (up 0.22%) and ICICI Bank (up 0.19%), were the major Sensex gainers.

Vedanta lost 4.48%. According to media reports, the Tamil Nadu government on Wednesday, 2 January 2019, moved the Supreme Court challenging the National Green Tribunal's order to reopen Vedanta's Sterlite copper plant in Thoothukudi. In its petition, the state government argued that the tribunal has no jurisdiction to hear the matter.

The green tribunal had last month set aside the state government's order to shut down the plant and described the All India Anna Dravida Munnetra Kazhagam-led government's order as unjustifiable. It had directed the Tamil Nadu Pollution Control Board to issue a fresh order of renewal of consent for the smelter within three weeks. The state government had then said it would challenge the order in the Supreme Court. However, the Madras High Court on 21 December 2018 had restrained Vedanta from reopening the plant after protests by activists and local groups. The Madurai branch of the High Court had said that the status quo would remain in effect until 21 January 2019.

Power Grid Corporation of India fell 2.25%. The company announced that its wholly owned subsidiary, POWERGRID Jabalpur Transmission, has successfully commissioned transmission system strengthening associated with Vindhyachal-V on build, own, operate and maintain (BOOM) basis. The transmission system has been put into commercial operation with effect from 1 January 2019. The announcement was made after market hours yesterday, 1 January 2019.

Bajaj Auto fell 1.29%. The company reported 18% growth in its total vehicles sales to 3.46 lakh units in December 2018 over December 2017. The announcement was made during market hours today, 2 January 2019.

Hero MotoCorp lost 2.64%. In December 2018, Hero MotoCorp sold 453,985 units, compared to 472,731 units in December 2017. The announcement was made during market hours today, 2 January 2019.

Tata Motors lost 2.91%. The trend of muted consumer sentiments continued in December 2018, impacting the sales performance of Tata Motors commercial and passenger vehicles business in the domestic market, which dropped by 8% at 50,440 units as against 54,627. In December 2018, liquidity crisis in the industry, higher interest rates and rising fuel costs continued to impact the commercial vehicle sales, with M&HCV (medium and heavy commercial vehicle) and I&LCV (intermediate and light commercial vehicles) segment witnessing a decline while the passenger vehicle business bounced back. Tata Motors' sales from exports (from CV and PV) in December 2018 was at 3,999 units as against 6,293 units in December 2017, lower by 36%, due to sharp TIV (total industry volume) contraction in Bangladesh due to elections and political uncertainty in Sri Lanka.

Coal India fell 1.70%. Coal India announced the provisional production and offtake figures of the company and its subsidiaries in December 2018. Production fell 0.9% to 54.13 million tonne in December 2018 over December 2017. Offtake fell 1.2% to 52.77 million tonne in December 2018 over December 2017. The announcement was made after market hours yesterday, 1 January 2019.

NMDC rose 1.20% after the company announced that its board will meet on 8 January 2019, to consider buyback of the fully paid-up equity shares of the company. The announcement was made after market hours yesterday, 1 January 2019.

On the macro front, the health of India's manufacturing economy improved further at the end of the year, as companies continued to scale up production and employment in response to strong inflows of new business, data released today showed. Posting 53.2 in December, from 54 in November, the Nikkei India Manufacturing Purchasing Managers' Index (PMI) was consistent with a further improvement in operating conditions across the sector.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 70.045, compared with its close of 69.43 during the previous trading session.

In the global commodities markets, Brent for March 2019 settlement was down 57 cents at $53.23 a barrel. The contract had risen 59 cents, or 1.11% to settle at $53.80 a barrel during the previous trading session.

Overseas, shares in Europe and Asia fell after data showed Chinese factory activity contracted in December. China's factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, data released today showed. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 49.7 in December from 50.2 in November, marking the first contraction since May 2017