The benchmark Bse Sensex dropped by 263 points in afternoon trade as investor sentiment weighed down by a sell off in global markets.

Investor caution continued after fear that the RBI may raise interest rates this week to rein in inflation concerns.

Capital goods, bank, metal, industrial, finance, basic material, consumer durables, realty and auto sectors witnessed selling. Telecom segment, however, witnessed good buying interest.

The 30-share BSE Sensex was down 263.20 points or 0.75 percent at 34,803.55 and the 50-share NSE Nifty fell 81.60 points or 0.76 percent to 10,679.00.