Weak global trends and disappointment over HDFC Bank results spilled brutally on stocks as the benchmark Sensex plummeted 1628 points, or 2.23 per cent, marking its biggest single-day fall in over one-and-a-half years.

The selloff resulted in the combined market capitalisation on the BSE eroding Rs 4.59 lakh crore.

Market circles said it was a much-needed correction, given the heady valuations, and investors must use this opportunity to accumulate quality stocks for the medium- and long-term. It came on the back of big unwinding in banking, metal and oil shares that was caused by both global and domestic factors.

At the global level, investors are concerned the US Fed could delay the rate cuts this calendar year, with the extent of reduction smaller than expectations.

They took their cues from Federal Reserve Governor Christopher Waller who said though interest rates will be reduced this calendar year it will be done ``methodically and carefully’’.

“In many previous cycles ... the FOMC cut rates reactively and did so quickly and often by large amounts. This cycle, however ... I see no reason to move as quickly or cut as rapidly as in the past,’’ he said in a prepared statement.

Investors dumped riskier assets such as equities to prefer safe haven avenues such as the dollar.

There was other disappointing news as well: GDP growth in China for October-December at 5.2 per cent fell behind estimates.

Moreover, escalating tension in the Red Sea is causing discomfort among investors as it has resulted in the firming up of prices of certain commodities such as crude oil.

Back home, disappointing results from HDFC Bank were a major factor that caused the crash. Though the country’s top private sector lender posted better than expected net profit some of the other parameters such as net interest margins (NIMs) and credit deposit ratio failed to enthuse the Street.

Brokerages claimed the lender is battling tight liquidity which is likely to impact its NIM. The bank had to sell government securities to maintain its margin in the third quarter, leading to a dip in its liquidity coverage ratio.

HDFC Bank led the losers chart in the Sensex group as it tanked 8.46 per cent or Rs 142.05 to end at Rs 1536.90 on the BSE.

The bearishness spread to other banking stocks such as Kotak Mahindra Bank, Axis Bank, ICICI Bank and SBI which fell up to 3.66 per cent.

The 30-share Sensex which began on a weak note at 71998.93 lost ground to collapse 1699.47 points or 2.32 per cent to an intra-day low of 71429.30 after which it ended at 71500.76, showing a drop of 1628.01 points or 2.23 per cent.

On the NSE, the Nifty tanked 460.35 points or 2.09 per cent to end at 21571.95.

“The market fall is led by banks on the back of HDFC Bank results. It is showing heightened levels of credit/deposit (CD) ratio beyond RBI’s comfort levels. This is the case with most other banks as well,” Naveen Kulkarni, CIO, of Axis Securities PMS said.

“Thus, the markets expect either margin pressure, in case banks go in for aggressive deposit mobilisation, a slowdown in lending growth, or both. This development can lead to some de-rating of the sector.’’