The Sensex slumped nearly 350 points today amid a global selloff in equities. The tightening of the race between Hillary Clinton and Donald Trump for the White House, just days before the November 8 vote, has introduced a new element of uncertainty into financial markets, analysts said.
This has sparked a selloff in riskier asset classes such as equities across the globe. On the other hand, the global prices of gold, which is considered a safe haven assets during times of uncertainty, has surged to 1-month high.
Markets are beginning to rethink their long-held bets of a victory for Democratic candidate Hillary Clinton, analysts said.
Investor anxiety has deepened over a possible Trump victory given uncertainty on the Republican candidate's stance on several issues including foreign policy, global trade and immigrants.
Polls suggest a tight neck-to-neck race between the two candidates, following last week's news that the FBI had opened a new investigation into Clinton's private email server.
Overnight, the Wall Street closed at a four-month low, with the US S&P 500 Index dropping 0.70 per cent. The CBOE volatility index, often seen as investors' fear gauge, briefly rose to a two-month high above 20 per cent.
Asian markets were also weak today with MSCI's broadest index of Asia-Pacific shares outside Japan dropping 1.2 per cent to seven-week lows while Japan's Nikkei fell 1.76 per cent.
The European markets were also trading on a weak note. Germany's DAX fell 0.85 per cent, France's CAC40 dropped 0.7 per cent and Britain's FTSE100 declined 0.4 per cent
The Sensex ended 349 points lower at 27,527 while Nifty closed at 8,514, down 112 points.
Sanjiv Bhasin, executive vice president at India Infoline, expects Indian markets to remain volatile ahead of the November 8 event. But he says that the globally induced volatility is a good time to buy Indian stocks given that the domestic economy is on a recovery path and earnings growth of India Inc is set to accelerate in coming quarters.
Indian stock markets witnessed broad-based selling pressure today, with all the sectoral indices on the BSE down in the red. The midcap and smallcap indices also fell nearly 2 per cent.
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