India's stock markets were hit by a double whammy on Wednesday. A steep fall in the Chinese markets, not helped by fears of war clouds looming over Iran, and a budget that hiked dividend distribution tax led to the Sensex closing below 13,000 points.
The Bombay Stock Exchange (BSE) posted a 541-point (4.01 per cent) fall, to close at 12,938.09. The National Stock Exchange's (NSE's), Nifty lost 148.6 points to close at 3,745.
"Though markets did react negatively to the budget, you can put most of the blame on Tuesday's crash in China, which triggered heavy foreign institutional investor (FII) outflows," said Deven Choksey of KR Choksey Shares and Securities.
Chinese markets tanked when funds exited to book profits, causing mayhem across global markets. Though Chinese exchanges closed positive on Wednesday, the US threat of war with Iran has spooked the markets. US and European markets, followed by Asian majors are still feeling the pressure. Till such time a reversal comes about, Indian markets will continue to feel the heat, an analyst said.