Disappointing domestic data, particularly slower gross domestic product (GDP) growth, uncertainty over China and fears of a rate hike by the US Federal Reserve saw key Indian benchmark indices plunging over 2 per cent on Tuesday.

The S&P BSE Sensex ended down 2.23 per cent, or 587 points, to close at 25,696.44, while the CNX Nifty lost 2.33 per cent, or 185 points, to end at 7,785.85. The decline was led by banks, metals, realty and auto stocks.

 “Global volatility in oil as well as the Chinese stock market is rattling FII sentiments. Domestic interest is still intact. The possibility of a rate cut is the only hope in the short run,” said Raamdeo Agrawal, Chairman, Motilal Oswal AMC.

Selling by FIIs, at ₹16,877.27 crore, was the highest in August since the financial crisis broke out in 2008. On Tuesday, FIIs sold shares worth ₹675.32 crore. Domestic institutional investors (DIIs) continued to support the markets with net purchases of ₹681.93 crore on Tuesday.

Global markets slip

The weak sentiment is in line with the fall in global markets. While the Tokyo Nikkei slumped 4 per cent, or 725 points, the Shanghai Composite, Jakarta Composite, Hang Seng and Straits Times indices also shed 1 per cent to 2.5 per cent.

Experts believe that Indian equity markets will continue to witness bouts of volatility and sell-offs till clarity emerges from the US Federal meeting.

“If the US Fed increases the rate by 25 basis points, a much anticipated factor over the last one year will be behind us, providing relief to the market. If the Fed does not increase the rate due to the present problems in the Chinese economy, it may still provide support to emerging markets, giving them more time to provide green shoots to the economy,” said Vinod Nair, Head — fundamental research, Geojit BNP Paribas Financial Services.

India VIX, a gauge of volatility, spiked 16.76 per cent to 28.7. Out of 1,557 stocks traded on the NSE, 1,282 shares declined while 229 shares advanced and 46 remained unchanged.

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