The benchmark indices saw a sharp fall on Wednesday, amid concerns of slowdown in global growth, with China’s manufacturing PMI slipping to a 19-month low.

The Chinese manufacturing gauge fell to 49.7 in December from 50.2 in previous month. This was the lowest reading since May 2017.

Market participants said that China’s manufacturing activity falling is a sign of a global economic slowdown and the adverse effect of the trade war on China’s manufacturing activity.

“There are enough indicators to show that there will be a slowdown in the global growth. Investors are concerned about the rising volatility as there is no clarity on tariff wars. Crude oil prices have also shown unprecedented volatility in the last year,” said Dhiraj Relli, managing director of HDFC Securities.

The weakness in rupee and disappointing auto sales numbers also dampened the sentiments. The rupee fell 1 per cent to close at 70.17, compared to the previous day’s close of 69.43.

The BSE Auto index fell more than 3 per cent. All constituents of the auto index lost. Eicher Motors was worse of the lot, as it ended 8.71 per cent down. The share price of TVS Motors fell by 5.34 per cent. Hero Motocorp, Maruti Suzuki and Tata Motors each fell by more than 2 per cent.

“The weak auto sales numbers were due to the liquidity crunch that prevailed during the festive season. If auto sales continue to remain tepid, it is a sign of the overall economy weakening,” said Siddhartha Rastogi, managing director of Ambit Capital.

The possibility of a farm relief package and lower tax collection has added to investors’ worries.

They fear these factors could worsen the fiscal health of the country.

“The government has to walk on a tightrope between fiscal prudence and populist measures. The market is worried that if the government gives up fiscal prudence, FII outflows could be massive,” said Rastogi.