The BSE Sensex and Nifty, which opened 1 per cent lower, saw further selloff on Monday as exit polls for Delhi election indicated a victory for Arvind Kejriwal's Aam Aadmi Party. Exit polls predicting a victory for AAP were telecast on Saturday; votes will be counted on Tuesday.

"Today's correction is a knee jerk reaction to the exit polls giving majority to Aam Aadmi Party in Delhi. Having said this, the correction was due since a long time as throughout January Nifty moved in uncharted territories and it was overbought," said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.

The Sensex fell as much as 380 points, while the Nifty dropped over 110 points to below 8,550 at its day low. Markets are now staring at a seventh straight day of fall.

"I don't think there will be no impact of Delhi elections given a high decibel election... If exit polls are true, it will be the first loss for the BJP after a long innings. Sentiments and morale of the party may be a bit down because of the loss," said Nischal Maheshwari, head of research at the Edelweiss Financial Services.

Analysts told NDTV that AAP's earlier policies have been anti-corporate and a win in Delhi could give a boost to other socialist parties. (Read)

AAP's policies such as more subsidy on power and water and its opposition to some reforms such as foreign direct investment in retail, have struck a sour note with investors, analysts say. As Delhi's Chief Minister for 49 days, Mr Kejriwal had ordered the state auditor to look into the accounts of power distribution companies to see if they were profiteering; he had also threatened to cancel the licences of Delhi's two electricity distributors over power supply issues.

"They will cut power tariffs, water tariffs -- that is the expectation," said TS Harihar of HRBV Client Solutions. Markets could correct more in the short term, but he expects 8,500 could be the floor for Nifty.

Power utilities that operate in Delhi saw selling pressure in early trade. Tata Power shares traded off the day's low, down 2.4 per cent, while Reliance Infra traded with over 5 per cent losses.

All sectoral indices traded in the red and on the Nifty 35 of the 50 shares traded lower.

DLF, which will report Q3 numbers today, traded 5 per cent lower and was the top Nifty loser.

Gail India traded 4.4 per cent lower as profits slumped 64 per cent. Tata Steel declined 4.3 per cent on Q3 profit fall.

Among the Nifty gainers were drug maker Sun Pharma, up 1.3 per cent and energy majors such as ONGC and Cairn India, which benefit from the rebound in global oil prices.

As of 1.15 p.m., the Sensex traded 281 points lower at 28,437, while the Nifty was down 79 points at 8,582.