The stock market benchmark Sensex on Thursday shed 213 points on fears that the government might step in to check the rush of foreign funds into equities, but a section of brokers saw it as a long due correction of overstretched valuation.

Brazil's latest move to curb capital inflows and weakness in European markets also weighed on the market sentiment, although Finance Minister Pranab Mukherjee has said that the rush of foreign funds into the country was not a matter of concern.

The government has, however, said that it would continue to monitor fund flow and act if there was any distortion.

Foreign Institutional Investors have pumped in over USD 15 billion in the country's equities market so far this year.

The Bombay Stock Exchange 30-share barometer settled the day at 16,785.65, a net fall of 213.13 points or 1.25 per cent from its previous close.

Industry chamber Assocham's suggestion to the government on Tuesday that foreign fund inflows should be subject to a two per cent tax may also have affected sentiments.

Hitech Securities Director Sanjeev Bhambri termed today's fall as a healthy correction to the market, saying: "Eventually the market will go higher by December than what it is now".

Domestic Institutional Investors, however, were sustained sellers in the last three days. They sold shares worth Rs 787 crore this week, as per provisional data on stock exchanges.

Among the Sensex companies, Jaiprakash Associates was trading at the lowest level. It fell by 4.53 per cent.

Reliance Infra was down 3.90 per cent, DLF 3.68 per cent, Hindalco 3.46 per cent, Reliance Comm 2.41 per cent, Sterlite Ind 2.22 per cent, ICICI Bank 2.18 per cent, SBI 2.15 per cent Sun Pharma 1.78 per cent and Tata Steel 1.76 per cent.

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