The Sensex fell 1,545.67 points, or 2.62%, to close at 57,491.51 while the Nifty declined 468.05 points, or 2.66%, to end at 17,149.10. This is the steepest fall in a day since November 26. Both indices had slumped as much as 3.5% earlier on Monday with the Nifty dropping briefly below 17,000, before recouping some of those losses. Fresh margin calls from brokers forced traders to square off bets, aggravating the decline.
Analysts said markets might be looking oversold after declining about 6.1% in the past five days. A short-term bounce is likely after the Fed’s two-day meeting ends on Wednesday unless the US central bank turns more hawkish than what the market expects, which could accelerate foreign fund outflows, they said. India’s financial markets will be shut on Wednesday on account of Republic Day.
In the stock market, the Volatility Index or VIX — a fear gauge — shot up nearly 21% — its sharpest one-day advance since November 26, indicating traders perceive higher risks to the market in near future. The rupee slid 17 paise to 74.60 against the dollar on Monday, mirroring the nervousness in equities. European stocks dropped on Monday with the Stoxx Europe 600 falling 2.3% as geopolitical risks added to worries. The MSCI Asia Pacific index, excluding Japan, fell 1.2%.