If you look back, the correction actually started after the Union Budget. In the last few weeks and days, the correction has sharpened. The Nifty has fallen from 12,000 to closer to 10,900 while the Sensex has fallen nearly 4000 pints from the peak. Here are some key factors that drove the correction in the stocks.

· The problems started with the Union Budget. The decision to impose tax on buybacks and also to impose tax on FPIs structured as trusts did not go down well with the markets and the sell off started hence.

· FPI selling has been very heavy post the budget. For example, in less than one month after the Union Budget, FPIs have sold nearly $3 billion worth of equities in the Indian market. Of course, they are buying bonds but that is only half of the outflows from equities.

· Global factors are also leading the selling in the markets. For example, Trump has just announced a 10% tariff on Chinese imports to the tune of $300 billion. That is likely to put further pressure on growth. Secondly, oil prices have been very volatile and higher oil prices mean higher trade deficit.

· There have been some domestic issues too. The recent case of CCD has highlighted that the problem of debt by proxy is still rampant in India and these companies are likely to leave another big hole in banks and mutual funds.

· Above all, there have been consistent downgrades of India growth story. Recently, CRISIL lowered the growth rate to just 6.9% with the risk of growth going lower. Weak monsoons in the first two months of June and July have also hit market sentiments.

· Lastly, most earnings have been disappointing in the first quarter. Auto stocks continue to see pressure on sales growth and private banks and NBFCs are now seeing a rise in NPA. All this has raised some serious questions about the sustainability of the rally in stocks, considering that most of them are already fully valued.