We had mentioned yesterday “while the market is on a firm uptrend, there is a chance of a sharp decline at least on an intraday basis. A fall below 5,530 will signal the first weakness”. Expect further decline after 650 points loss in Sensex today

Except for few minutes of trading in the green, Indian indices saw a gradual slide downwards, trading in the negative for the entire session and ending with a huge decline on today. The 30-share BSE Sensex opened higher at 19,003 and hit an intra-day high of 19,007. The index hit the low of 18,166 and closed down at 18,235 (down 651 points or 3.45%). The Nifty opened higher at 5,575 and, after hitting an intra-day high at 5,581, ended at 5,324 (down 209 points or 3.77%). The percentage loss on the Sensex and the Nifty is the highest since 16 August 2013. The National Stock Exchange (NSE) saw a higher volumes of 62.63 crore shares.

All the other indices on the NSE closed in the negative. The top five losers were Bank Nifty (5.20%); Realty (4.88%); Finance (4.87%), FMCG (4.63%) and Media (4.47%).

Of the 50 stocks on the Nifty, three ended in the green: Lupin (2.59%); Coal India (1.14%) and Cairn (0.91%). The major losers were Axis Bank (-10.65%); IndusInd Bank (-8.67%); DLF (-7.17%); Reliance Infrastructure (-7.11%) and Punjab National Bank (-7.05%).

Last week, after the passage of the Food Security Bill, the market was pulled down on concerns of rising fiscal deficit. Yesterday, the Rajya Sabha approved a $20 billion scheme to distribute subsidised wheat and rice to 80 crore people.

Partly because of rising concerns of higher fiscal deficit, Standard & Poor's (S&P) considers chances of a credit ratings downgrade for India higher than for Indonesia. According to S&P, there was more than a one-in-three chance for India rating cut within two years. The ratings agency has a "BBB-minus" rating on India with a "negative" outlook. A downgrade would push Asia's third largest economy to "junk" status. S&P rates Indonesia at "BB-plus."

Goldman Sachs has cut India's GDP forecast to 4% from 6% for FY14 and to 5.4% from 6.8% for FY15. It says the downgrade reflects the more difficult external funding conditions for Asia as markets increasingly anticipate Fed tapering and eventual exit from unconventional monetary policies. They have also put out more bearish forecasts for the rupee, expecting the currency to trade at 70 in three months, at 72 in six months and back to 70 in 12 months against the US dollar.

Adjustment in the rupee, which has fallen by nearly 20% since May, was called for as the country has seen higher inflation compared with other countries, Prime Minister's Economic Adviser C Rangarajan said. Today the rupee reached closer to its all time low level of 68.80 per US dollar. Just six months ago, a clueless Rangarajan had pointed out that rupee should trade between 55-53 to the US dollar.

Rising crude oil prices due to fears about a potential US military strike on Syria  also added to woes in stock markets. Russian defence ministry was quoted by a news agency as saying that the radar station at Armavir, near the Black Sea, which is designed to detect missiles from Europe and Iran, had detected two ballistic "objects" fired towards the eastern Mediterranean. However, there was no sign of a missile strike on the Syrian capital Damascus according to Russia's state-run RIA news agency.

Except for Straits Times (down 0.03%) all other Asian indices ended in the green. Nikkei 225, was the top gainer, up 2.99%.

China's official purchasing managers' index (PMI) for the non-manufacturing sector dipped slightly to 53.9 in August from July's 54.1, according to the National Bureau of Statistics. A reading above 50 indicates activity in the sector is accelerating, while one below 50 indicates it is slowing. The services sector index followed the bureau's manufacturing PMI on Sunday, which showed China's factory activity expanded at the fastest pace in more than a year in August with a jump in new orders.

Australia’s central bank left its benchmark interest rate unchanged and omitted a reference to scope for more easing. Governor Glenn Stevens and his board kept the overnight cash-rate target at a record-low 2.5%. The Governor said, “The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values, and further effects can be expected over time.”

US stock markets remained closed on Monday, on account of the Labor Day holiday.

Europe's financial markets were trading lower in early trade on Tuesday ahead of monetary policy decisions in Japan, the Euro zone and the UK on Thursday and the US employment report on Friday. US futures were sharply up.