Mumbai, July 7: Reliance Industries — the top-weighted stock in the sensex — was clobbered in a torrid late afternoon session with investors spooked by the talk of a windfall tax on private oil refiners, sending the bellwether index into a sharp nosedive.

RIL has a weight of close to 16 per cent in the benchmark index.

The BSE sensex had spurted almost 339 points in early trades, but talk of the windfall tax and the prospects of another interest rate hike sparked a wave of selling on the markets.

Reliance Communications Ltd — another index heavyweight — also saw its shares drop on account of apprehensions that the ongoing dispute with Mukesh Ambani could derail the proposed deal with MTN of South Africa.

The sensex, which opened strong at 13561.92, hit an intra-day high of 13793.39 as investors indulged in bargain hunting and picked up stocks virtually across the board. However, the index shed most of these gains towards the last hour of trading as heavyweights such as RIL took a beating. Shares of RIL ended at Rs 2,028.15, tumbling 3.4 per cent.

Essar Oil fell nearly 2 per cent and Cairn India plunged nearly 5.5 per cent. The BSE oil & gas index was the lone loser among the sectoral indices with a drop of 2.03 per cent.

“It’s now more or less certain that the Left will withdraw support and that the Samajwadi Party, which has been calling for the imposition of a tax on the profits of private oil companies, will extend support to the government. This is not good news for private oil companies unless the government comes out with a clarification,” said an analyst with a brokerage who did not wish to be identified.

Dhiraj Sachdev, head of equity-PMS at HSBC, added that it was the drop in Reliance group stocks such as RIL and R-Com which had its impact on the benchmark index.