Indian equity benchmarks dropped the most in two months, dragged by ITC and other cigarette makers after the government raised levies on tobacco products.

The S&P BSE Sensex Index declined 1.1 percent to 31,710 while the NSE Nifty fell 0.9 percent to 9,827.

Both the index suffered their biggest since May after setting multiple new highs this year as domestic and foreign investors bet on strong economic growth and improving sentiment on earnings results.

The S&P BSE Fast Moving Consumer Goods Index dropped 6.1 percent, its biggest one-day loss since October 24, 2008. ITC Ltd. closed 12.49 percent lower, its biggest one-day decline since May 12, 1992.