The main Indian equity benchmarks traded sharply lower in the dying minutes of trade, tracking losses in other Asian markets and weakness across European markets. US stock futures too are pointing to a fall on Wall Street later today. The BSE Sensex and the NSE Nifty are down close to 2% each. The broader market indices too traded in the red, leading to a weak market breadth.

At 3:38pm ( IST), the BSE Sensex was 17,070, down 303 points over the previous close. It had earlier touched a day’s high of 17,444 and aday’s low of 17,068.It opened at 17,347.

RIL,Sun Pharma, NTPC, ACC were among the notable leaders in the Sensex and the Nifty.

Infosys, Wipro, Bharti Airtel, DLF, ICICI Bank, Coal India, Bajaj Auto, L&T, BHEL, Hindalco, are among the notable losers in the Sensex and the Nifty.

NSE Nifty was quoting 5,193 down 97 points over the previous close. It has earlier touched a day’s high of 5,310 and a day’s low of 5,195. It opened at 5,277.

The BSE Small Cap index and BSE Mid Cap index was trading down 2%.

Realty,Teck,IT, Auto, Oil and Gas, HC, FMCG, PSU, Bankex ,Consumer Goods, Power,Auto, Bankex,Metal, Power , Consumer Durables indices are the losers.

All the sectoral indices on the BSE ended lower. The Oil & Gas index managed to check losses due to gains in index bellwether RIL.

Metals, Realty, Capital Goods and Teck indices were among the top losers, down 3% each. The IT index was down ~3% while Power and Banking indices lost 2.6% and 2.3%, respectively. Auto was down ~2%, while PSU index dropped 1.8% and FMCG 1%.

After being down ~1%, the INDIA VIX closed up by more than ~7%. It ended at 21.57 after touching a low of 19.71. It had opened at 20.09.

The renewed losses in the Indian shares came after media reports said that Macquarie's Asia hedge fund has exited its short positions in Indian single stock futures in response to the proposed GAAR provisions.

The Macquarie Asia hedge fund has decided to use a futures contract linked to the NSE Nifty index on the Singapore Exchange to get its short exposure to India, according to reports.

The US$1.5bn Macquarie Asian Alpha Fund also cut its India long exposure in March, reports said.

Foreign investors have raised concerns about two recent tax proposals from the Indian government - one relates to oversease transfer of Indian assets and the other is linked to investments made through tax havens like Mauritius.

The key Indian stock indices had been up marginally almost throughout the morning session, reversing part of Friday's losses triggered by a sudden and sharp fall in the Nifty futures.

The trend in Indian equities this morning was in contrast to what was happening in other Asian markets. Most regional benchmarks were trading with a negative bias today despite gains for the Dow Jones Industrial Average and European markets.

Asia markets declined after data showed that Chinese manufacturing activity improved in April from March but remained in contraction mode.

China's manufacturing activity contracted further in April, although the sector improved from levels seen in March, a preliminary reading from HSBC showed today.

HSBC's so-called "flash" PMI rose to 49.1 in April, compared with a final reading of 48.3 in March.

A reading below 50 shows contraction, while one above 50 indicates an expansion.

Also, European stock indices fell sharply today while bond yields rose in Spain, Italy, the Netherlands and France.

Socialist challenger Francis Hollande won the first round of French prsidential elections, while budget talks collapsed in the Netherlands.

Data showed today that business activity in the eurozone contracted at a faster-than-expected pace in April.

French banking shares came under pressure after Socialist candidate François Hollande beat President Nicolas Sarkozy in the first-round presidential election voting on Sunday. The duo will face off on May 6 in a runoff election.

In addition, the Netherlands is facing the prospect of an early general election after budget talks aimed at resolving fiscal problems fell apart over the weekend, threatening the nation's triple-A credit rating and fueling jitters about the euro area debt crisis.