BENGALURU, Jan 6 (Reuters) - Indian shares snapped a four-session rally on Thursday as a lightning surge in domestic COVID-19 cases and hawkish signals from the U.S. Federal Reserve slammed investor sentiment.
Dragged by technology and realty stocks, the blue-chip Nifty 50 index ended 1% lower at 17,745.90 and the benchmark S&P BSE Sensex fell 1.03% to 59,601.84.
The losses brought an end to a new year rally that had helped the indexes gain 2.3% each so far this week.
India reported 90,928 new daily COVID-19 cases on Thursday, up nearly four-fold since the start of the year, with megacities Delhi, Mumbai and Kolkata leading the spike.
Sentiment was also weaker globally after the Fed signalled the possibility of faster-than-expected U.S. rate hikes and stimulus withdrawal.
India volatility index, which indicates the degree of volatility traders expect over the next 30 days in the Nifty 50, rose as much as 7%.
Analysts said the spike in volatility reflected the uncertainty over the impact of the Omicron variant, whose rising spread was also likely to prompt some profit-booking.
While the variant has not caused a significant jump in hospitalisations, fears are growing about a spread to rural areas where health facilities are weaker.
Nifty's realty and IT index fell the most among sectoral indexes, losing 1.5% each, while banking stocks ended a sharp rally to decline 0.6%.
Conglomerate Reliance Industries settled 2.2% lower after saying it raised $4 billion in U.S dollar bonds.
Bucking broader weakness, the S&P BSE telecom index added 1.3% to gain for an eighth straight session. Bharti Airtel closed up 1.5% and Vodafone India rose 1.3%.
Analysts at ICICI Securities said in a pre-earnings note the sector would see steady revenue growth in the third quarter.
The Indian rupee slipped 0.2% to 74.51 against a firmer dollar, but inflows towards Reliance's dollar bond capped losses.
India's benchmark 10-year bond yield touched its highest level since Jan. 31.
(Reporting by Shivani Singh in Bengaluru; Editing by Aditya Soni)