Mumbai: The BSE benchmark Sensex plunged by almost 390 points to below the 16,500-mark at 1130 hours today on widespread selling by funds and retail investors, despite a sharp moderation in food inflation for the week ended November 26, amid a weakening trend on other Asian bourses.

The 30-share Sensex was down by 389.23 points, or 2.30 per cent, at 16,487.83 at 1130 hours. All the sectored indices on the BSE were trading lower, led by realty, metal, IT and banking shares, with losses of up to 3 per cent.

In a similar fashion, the broad-based National Stock Exchange index Nifty tumbled by 123.75 points, or 2.44 per cent, to trade below the 5,000-level at 4,938.85 at 1130 hours.

Market analysts said the trading sentiment was dampened by a fall in stocks across the Asian region amid weak economic data from Japan and Australia that signaled the global economy is slowing ahead of a European summit to tackle the euro zone sovereign debt crisis.

In addition, profit-booking of gains recorded in yesterday’s trade by market participants and the government’s decision to suspend FDI in multi-brand retail accelerated selling activity, brokers said.

The sharp decline on the bourses was despite a sharp moderation in food inflation to 6.60 per cent for the week ended November 26 from 8 per cent in the previous week.

Meanwhile, in the Asia region, Hong Kong’s Hang Seng index was down by 0.96 per cent and Japan’s Nikkei shed 0.66 per cent in late morning trade.