Benchmark indices Sensex and Nifty succumbed to the global sell-off amid a rising dollar index and relentless foreign capital outflows. The national results season is nothing out of the ordinary and its impact is already visible on downward earnings revisions. Globally, there are concerns about U.S. President-elect Donald Trump’s potentially aggressive trade policies. This led to a strengthening of the dollar and a fall in the rupee to a new low earlier in the day, raising fears of further foreign capital outflows. Added to this is the fact that investors are also lowering their expectations regarding a rate cut by the US Fed.

At 1:30 p.m., most European markets were trading down around 1 percent, following a 3 percent decline in Asian markets today. There are fears that the rupee could depreciate by another 8-10% under the Trump administration.

Falling below the 79,000 mark, the BSE Sensex fell 696.67 points, or 0.88 per cent, to 78,799.48. Banking stocks HDFC Bank and State Bank of India contributed the most to the fall in the Sensex. NTPC, Tata Motors and Bajaj Finance also contributed to the decline.

The NSE Nifty lost the psychological mark of 24,000 and was later trading at 23,930.40, down 210.90 points or 0.87 percent.

Large FPI outflows have historically led to sharp corrections in Indian markets. In most cases where the Nifty 50 fell more than 5% in a month, FPI flows were negative, JM Financial said.

“Heavy selling within FIIs can be attributed to: (1) a season of poor earnings; (2) an overvalued Indian stock market; (3) a flow of foreign capital to other markets. (China, Japan and Taiwan saw an influx of foreign capital),” he said.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said incessant selling in FPIs favored the bears and dragged the market lower.

“It is important to note that the intensity of FII sales is decreasing (FPI inflows stood at Rs 2,026 crore on Monday) and inflows into mutual funds are increasing steadily, which will allow DIIs to continue to buy,” VK Vijayakumar, Chief Investment Strategist. at Geojit Financial Services, said.

Akshay Chinchalkar, head of research at Axis Securities, said Nifty remains stuck in a no-man’s land between resistance at 24,360 and support at 24,000, which is in sync with market volatility but has not been able to move in both directions since the October 25 low, at 24,073.

“Yesterday’s rally in the index was quickly absorbed, leading the daily candle to trace a long upper shadow that shows selling pressure persists at higher levels. The Bank Nifty outperformed compared to the Nifty lately, and this is likely to continue based on index options positioning and the fact that the banks-to-nifty ratio is on the verge of breaking above a downtrend line from late May highs. ” he said.