With only two trading sessions left before the announcement of the Budget, the stock markets witnessed a sharp fall on Wednesday. The Sensex dropped 937 points, or 1.94 per cent, to close at 47,409. The index is down nearly 3,000 points from the recent life-time high it had hit. The Nifty index fell by 271 points to 13,967. The index is down nearly 1000 points from its life-time high.
Call options
There has been selling of more than ₹45,000 crore of call options of the Nifty index, the largest traded derivative contract. Call options are an instrument to go long on the markets in the derivative segment, which indicates a bullish stance. But when people sell it aggressively, it indicates they are bearish.
Fear of new tax
Another reason for the fall is the fear among traders that some new tax would be imposed on the stock market participants or existing taxes woud be hiked, experts said. Also, investors and traders are cautious ahead of the US Fed meet outcome later on Wednesday, and uncertainty around the US stimulus.