After weeks of sliding, suddenly the drop. Thursday appeared to bring further bad news for the Indian market that has been on a slippery slope for the last two weeks.

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Shares plunged more than 2 per cent on Thursday, at their lowest closing levels since April. The fall was not entirely unanticipated, markets across the globe have been volatile in the face of trade wars unleashed by the Trump administration. Add to it, the expected rate hike in the United States, which pushed investors away from equities.

US Dow plunged 832 points, or 3.2 per cent, on Wednesday. Tech stocks took a beating, Nasdaq tumbled 4 per cent — its worst day since the Brexit referendum of June 2016. The tumble in the US markets pushed sentiments down in Indian markets.

Stock markets Sensex and Nifty nosedived with the former closing down 2.19 per cent at 34,001.15 while the broader NSE Nifty ended 2.16 per cent lower at 10,234.65. The banking sector, perpetually at the receiving end of public and government sentiment, faced selling pressure.

The worst hit were PSU banks, which took a pounding along with metals, automobiles, pharmaceuticals and IT companies. What is going to be of some concern to Indian policymakers is that despite a recovery in rupee from record lows, foreign buying is not picking up.

Today’s cave-in is yet another sign — if another sign was even needed — that Indian markets are too closely entwined with what happens in the US.  In fact, signs of an impending collapse and downward market sentiment became evident with not just heavy losses in the US market, but with the plunge of Asian stock markets, after the worst session on Wall Street for months as the loud talking US President said the Federal Reserve had “gone crazy” with plans for higher interest rates.

The flailing rupee, the cause of much worry for the Narendra Modi government in the last couple of months, on Thursday inched closer to 74.50 against the dollar on account of buying in the American currency by banks and exporters.

That has hardly helped improve sentiment in the equity markets. Revealingly, experts believe that the rupee weakness will persist, amid difficult global and domestic environment. The critical question therefore is whether the Indian government can offer corrective solutions or are even in a position to do so.

In such a situation, as can also be expected, there was sustained outflow of funds by FIIs, leading to additional pressure on Indian equity markets. After selling shares worth Rs 10,824 crore in September, FIIs net sold shares worth of Rs 14,097 crore in just seven trading sessions so far in October.

Today might have been an overreaction to US markets, and there seems to be nervousness among investors. While the fundamentals for companies or the economy has not changed, ephemeral sentiment has and it needs to be revived.

The market will recover if it decouple itself from the US markets. Real assets need to rise over financial assets. It may look like a rout but it is temporary.  Investors will plan the next run, all they need is a boost.