Something unnerved the markets today to tumble over 400 points! We tell you what went wrong

Indian markets are near 2-month lows as a global risk-off trade is in place after minutes of a meeting within the US Federal Reserve were made public 4 days ago.

Equities may suffer more losses in the coming days as investors grapple with competing currency devaluations, slowing global growth and a tepid demand for everything from cars to crude oil.

Earlier this week, some officials at the US Fed, the world's most powerful Central Bank, expressed their concern about the weakening health of the global economy and its subsequent impact on the United States as also on the Fed's own plans for raising interest rates in America. Rates haven't moved up since 2006 and were widely expected to inch higher from September this year.

It was the most anticipated event across the globe for investors of all hues.

The Fed opined that September may not be the right month to raise rates against the backdrop of a slowing global economy and demand slippages. A rise in Interest rates would make US companies relatively noncompetitive. The Fed's angst on a global slowdown sparked a sharp sell-off in equities, which were already reeling under the pressure of a surprise currency devaluation by China, a week earlier.

The Chinese saying: `May you live in exciting times', came true.

There is no doubt that China, the world's 2nd largest economy, is slowing. Weak car sales, plunging equity markets and excessive production capacity had the Chinese government worried. It acted by devaluing the Yuan and making its cut-price exports even more competitive globally. The move reverberated across all markets in nearly every country that deals with China. Currencies from Malaysia to Kazakhstan reacted adversely as each nation worked overtime to protect its local industry from cheaper Chinese exports.

Adding to problems is the political stalemate in debt-laden Greece, where Prime Minister Alexis Tsipras has resigned.

These global events come at a time when oil producing nations are competing to out produce each other. Thus, crude oil futures are at a 6-1/2 year low, pushing these oil-revenue dependent countries towards a fiscal crisis. However, lower oil prices are good for importing nations such as India.

Major global markets reacted to these changes by giving away all their gains for 2015. As a consequence, the S&P 500 recorded its worst fall in 18 months. The most widely followed and tracked index fell below its 200-day moving average, a key measure in deciding global sentiment.

The distaste for equities is such that valuation of shares in Hong Kong are at a 12-year low and are competing with those in Pakistan!

Indian stocks are trading at their worst since June 29. Major benchmarks such as the Nifty, Sensex and the Bank Nifty are all below the 200-day moving average, signaling a period of weakness ahead.

Dismal first quarter earnings, tepid demand for two-wheelers, slowing FMCG sales coupled with no relief in interest rates have forced traders to push the SELL button on local stocks.

Investors now expect earnings to pick up from the 3rd quarter onwards as markets sift through the increasing debris of short sales, downgrades and weak commodity prices.

(Image credits: wwlp)