Equity benchmark indices Sensex and Nifty buckled under selling pressure for the third straight session to settle nearly 1 per cent lower on Thursday as investors pared exposure to auto, banking and financial shares amid a sluggish trend in global markets.

Global equities fell after the US Federal Reserve signalled that they expect to raise rates once more this year to fight inflation.

The 30-share BSE Sensex fell 570.60 points or 0.85 per cent to settle at 66,230.24. During the day, it plunged 672.13 points or 1 per cent to 66,128.71.

The Nifty declined 159.05 points or 0.80 per cent to end at 19,742.35.

"Domestic market declined following a hawkish stance by the Fed chair and prolonged high-interest rate trajectory, which is not positive for a slowing global economy.

"PSU Banks and Mid and small-caps were the worst hit due to stretched valuations and concern over moderation in yields. Rising oil prices and erratic rainfall further led investors to stay cautious in the market," Vinod Nair, Head of Research at Geojit Financial Services, said.

ICICI Bank was the biggest loser in the Sensex pack, slipping 2.81 per cent, followed by Mahindra & Mahindra, State Bank of India, UltraTech Cement, IndusInd Bank, Kotak Mahindra Bank, Tata Motors, Bajaj Finserv, Axis Bank and Power Grid.

Tech Mahindra, Bharti Airtel, Infosys, Asian Paints, Hindustan Unilever, Larsen & Toubro and Titan were the gainers.

In the broader market, the BSE midcap gauge fell 0.99 per cent and smallcap index declined 0.98 per cent.

Among the indices, bankex fell by 1.75 per cent, auto declined by 1.58 per cent, financial services (1.35 per cent), realty (1.16 per cent), consumer discretionary (1 per cent), utilities (0.97 per cent), power (0.90 per cent) and commodities (0.75 per cent).

Teck emerged as the only gainer.

"Bearish sentiment across the global equities led to selling in the domestic market for the third straight session as investors fretted over the US Fed statement indicating one more rate hike later this year.

"Other negative catalysts like lingering overseas fund outflows, rising US Dollar index and treasury yields, and higher crude oil prices are making investors jittery," Shrikant Chouhan, Head of Research (Retail), Kotak Securities Ltd, said.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong ended in the negative territory.

European markets were trading in the negative territory. The US markets ended in the red on Wednesday.

The US Federal Reserve left its key interest rate unchanged on Wednesday for the second time in its past three meetings, a sign that it's moderating its fight against inflation as price pressures have eased. But, Fed officials also signalled that they expect to raise rates once more this year.

"Market fell by 2.2 per cent in the last three days amid profit booking at higher levels. Uncertain global cues and persistent selling by FIIs are likely to keep markets under pressure in the near term. It would be better to prefer defensive sectors for some time until the market stabilises," Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said.

Global oil benchmark Brent crude declined 0.81 per cent to USD 92.77 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,110.69 crore on Wednesday, according to exchange data.

The BSE benchmark had tumbled 796 points or 1.18 per cent to settle at 66,800.84 on Wednesday. The NSE Nifty declined 231.90 points or 1.15 per cent to end below the 20,000 mark at 19,901.40.