All sectoral indices ended in the red with the Nifty FMCG falling 2.4 percent while Nifty Midcap Index gave up 19,000-mark, ending with cut of 1.3 percent.
The market fell sharply for second consecutive session with the Sensex correcting nearly 1,000 points following further decline in rupee, weak global cues and lingering trade war tensions.
With the fall in last couple of weeks, benchmark indices lost around 4 percent from its record highs touched on August 28.
The Nifty50 gave up its crucial support of 11,300, which indicated that the fall may continue further, experts said, adding the rupee and trade war woes may continue to make headlines.
"We are seeing global volatility and emerging markets are under pressure. So the market falling 5-10 percent is par for the course," Rashesh Shah, CEO of Edelweiss Capital told CNBC-TV18.
related news
The 30-share BSE Sensex on Tuesday closed down 509.04 points or 1.34 percent at 37,413.13 and the 50-share NSE Nifty lost 150.60 points or 1.32 percent to 11,287.50, hitting the lowest level since August 2, 2018.
All sectoral indices ended in the red with the Nifty FMCG falling 2.4 percent while Nifty Midcap Index gave up 19,000-mark, ending with cut of 1.3 percent.
Here are top five factors that are driving the market down:
Rupee
The Indian rupee weakened further after seeing stability from the beginning of day today, hitting fresh low of 72.74 on rising dollar demand and higher crude oil prices.
It was trading at 72.72 a dollar, down 27 paise compared to previous close. The total fall year-to-date is more than 13 percent now.
"The current downward drift of the rupee certainly owes much to the subtleties of one of the most important factors, the rising interest rates in the US. Interest rates in the US are on the rise for some time now, in order to attract more inflow of foreign capital investment, affecting emerging market currencies as money is being pulled out from those riskier economies to the US," Rajiv Ranjan Singh, CEO of Karvy Stock Broking told Moneycontrol.
He said that the slide could continue for a little more time, however, history suggests that nothing can continue to rise vertically, there will be a stall to this rally sooner rather than later as the weekly charts of the pair suggests.
The recent sell-off in the emerging market currencies across the globe owing to the trade war-induced worries, he feels that the INR is likely to depreciate towards 73-73.50 by the end of September 2018.
Global Cues
Globally investors turned cautious awaiting developments in international trade disputes. Asian markets ended mixed with the China's Shanghai Composite index shedding early gains to end at its weakest close in 31 months.
European markets turned negative as investors shifted their focus to trade war, with the Germany's and Britain's FTSE falling 0.7 percent each. Investors are conscious of potential new trade tariffs from the US on China.
Reports suggested that the White House is preparing a second meeting between President Donald Trump and North Korean leader Kim Jong Un, while tracking the last events on global trade.
Reports also said about the likely deal between the United States and the EU in couple of months.
MSCI's emerging-market index fell about 0.5 percent, its ninth decline in the past 10 sessions, on trade war concerns.
Trade War concerns remain
Trade war concerns escalated as China asks WTO for sanctions in US trade dispute. China has already indicated that it will respond with tariffs if the United States takes any new steps on trade.
Now, fresh reports suggest that China will ask the World Trade Organization next week for permission to impose sanctions on the United States, for Washington’s non-compliance with a ruling in a dispute over US dumping duties that China initiated in 2013, said a Reuters report.
The request is likely to lead to years of legal wrangling over the case for sanctions and the amount, it said.
Crude
Crude oil prices increased further on supply worries after Iranian exports started declining on US sanctions.
US sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output, CNBC said, adding, the US government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.
Benchmark Brent crude futures, the international benchmark for oil prices, rose 0.59 percent to $77.83 a barrel while US crude futures gained 0.18 percent at $67.66 a barrel at the time of writing this article.
Technical
The Nifty50 breached its crucial short term support placed at 50-EMA placed around 11,300 in trade on Tuesday. The next crucial support for the index is now placed near 50-DMA (11,274), 11250, as well as 11200 levels.
The index saw deep cuts as soon as it broke below its swing low of 11,393. Rise in India VIX to levels above 15 is also making market participants slightly nervous. India VIX and markets have an inverse relationship.
“Last week low 11,394 is the immediate support for Nifty and a break below this level could exert selling pressure which could take the index towards 11250-11200 which is the Nifty breakout level,” Ashish Chaturmohta - Head Technical & Derivatives - Sanctum Wealth Management told Moneycontrol.
“In Nifty options, maximum open interest for Puts is at 11400 followed by 11500 indicating as good support zone for the market; while for Calls it is at 11800. Significant amount of Call writing was seen in strike price 11500 to 11800 suggesting upside is likely to capped and unwinding in Puts from 11700 to 11400 pointing to downside in near term,” he said.