Indices dip by over 1% as rupee weakens, FIIs sell

Benchmark indices BSE Sensex and NSE Nifty 50 witnessed a sharp correction, settling down by over 1 per cent each, mainly because of selling across the counters.

The 30-share Sensex lost 1,064.12 points, or 1.30 per cent, to end Tuesday's trading session at 80,684.45.

Similarly, the NSE Nifty50 ended down by 332.25 points, or 1.35 per cent, to settle at 24,336.

Meanwhile, volatility index India Vix surged by 3.31 per cent to 14.49 levels, indicating a rise in market volatility.

Ahead of the US Federal Reserve rate cut decision, which is due on Wednesday, the market witnessed continuous selling by foreign institutional investors (FIIs), which led to the fall, according to brokers.

Markets have already factored in a 25 basis points rate cut. However, investors are keeping a close watch on future road map of interest rates.

Experts have also attributed the fall to the weakening of the rupee against the dollar. The rupee was weighed down by disappointing trade balance data and weak domestic markets. On Tuesday, the rupee consolidated in a narrow range to settle at 84.90. Forex traders said the rupee was likely to remain under pressure due to concerns over slowdown in the economy and dollar demand from importers.

Brokers are also of the view that the widening of India's trade deficit to a record $37.8 billion in November might be playing on the minds of investors, leading to selling.

The deficit was fuelled by a surge in merchandise imports and decline in merchandise exports. Also, while major global central banks have begun cutting rates, market volatility has increased after the US elections.