MUMBAI: The benchmark BSE Sensex failed to hold initial gains and plunged over 348 points at close as funds indulged in selling stocks on concerns over rising tensions in Iraq and surging crude prices.

It ended at 25,228.17, recording the biggest single-day drop in over 4 months. Investors say higher crude oil price, if sustained, would increase India's subsidy bill and trade deficit.

Among blue-chips, Reliance Industries falls 1.5 percent while Axis Bank slumps 3.1 percent.

After rising to 25,688.31 in morning trade on the back of positive retail inflation and IIP data, the Sensex fell back to trade lower by 357.29 points, or 1.40 percent, to 25,218.92 at 1:30pm.

All sectoral indices were trading lower by up to 5.06 percent as profit-booking in realty, consumer durables, PSUs, power, capital goods, oil and gas, metals and FMCG sector stocks dragged down the key indices.

The 30-share Sensex had gained nearly 110 points in the previous session.

Brokers said emergence of profit-booking by funds in stocks that had recently witnessed gains and a mixed trend in the global markets, reversed an early rising trend.

Besides, depreciating rupee and surging crude prices in the global markets also influenced the sentiments in Mumbai.

Similarly, the National Stock Exchange index Nifty declined 102.10 points, or 1.33 percent, to 7,547.80 after surging to 7,678.50 in early trade.