BENGALURU, Sept 26 (Reuters) - Indian shares closed at nearly two-month lows on Monday, mirroring the weakness in markets around the world, as investors dumped equities and other risky assets on worries over a slowdown in global economic growth.
The NSE Nifty 50 index fell 1.8% to 17,016.30, while the S&P BSE Sensex dropped 1.6% to 57,145.22.
The Indian rupee sank to a fresh record low on Monday at 81.6526 against the U.S. dollar.
Last week, the United States and half-a-dozen other countries raised interest rates, with some even committing to further hikes, continuing to put pressure on the financial system.
Meanwhile, the Reserve Bank of India is set to raise rates again this week, with a slim majority of economists in a Reuters poll expecting a half-a-percentage-point hike and some others expecting a smaller 35-basis-point rise.
"Earlier it was expected that the RBI will take a pause. However, given the firming up of food prices, the market is now building another 35 basis point hike after this, which is affecting sentiment," said Gaurav Dua, head of capital market strategy at Sharekhan.
Both the Nifty small-cap and mid cap indexes underperformed the benchmark Nifty 50, tumbling 3.4% and 3.1%, respectively.
"We could see further cuts in the Indian market over the next few days considering the hawkishness being displayed by global central banks and a weakening currency," Vineet Bagri, Managing Partner- TrustPlutus Wealth said in a note.
The Nifty metals index fell 4.1%, auto index dropped 3.8%, while the energy and bank indexes were down 3.1% and 2.4%, respectively.
Asian Paints was the top gainer in the Nifty 50 index, rising 1.3%, while Tata Motors's 6% drop was the steepest.
Among the rare bright spots, shares of precision engineering company Harsha Engineers surged 47% on their debut.
Foreign institutional investors sold net 29 billion rupees ($355.6 million) worth Indian equities on Friday as per provisional data available with the National Stock Exchange.
($1 = 81.5600 Indian rupees)
Reporting by Nallur Sethuraman in Bengaluru; Editing by