There were a number of reasons for the Nifty and the Sensex to be so sharply down. In fact, the Sensex has now lost nearly 1000 points in just 3 trading sessions and is trading at its lowest point in 7 months. The fall has been much severe on a handful of stocks and the only reason the index has held up is because of a handful of stocks like RIL, HDFC Bank, ICICI Bank, Kotak Bank, TCS, HDFC and Infosys which are still performing quite well. Here is why the markets fell on Thursday.

· There was trader panic as most of them rushed to cover their long positions on the weekly option expiry date. With another weekend coming up, the traders did not want to take any risk.

· The government boost which was discussed last week has not materialized and markets are still awaiting either some clarity on the FPI tax front or some signs that the government is willing to undertake a fiscal boost. Nothing has been forthcoming.

· The Supreme Court order on DLF also soured the sentiments in the market with the real estate index correcting more than 6.5% in a single day. Despite its negligible weight in the index, it soured sentiments on all the rate sensitive stocks.

· Oil prices have been rising and have now settled above the $60/bbl mark. That is not great news at a time when India is concerned about its trade deficit

· Lastly, the weak rupee had a big impact on the stock markets on Thursday. The rupee weakened on Thursday and has lost nearly 6% since the beginning of August. The rupee fall was led by the weakening of the Chinese Yuan after the PBOC again dropped the mid-point to boost its exports.

Of course, in the midst of all these factors, the markets have seen company after company raising the risk of bad loans. We have seen companies like IL&FS, Dewan Housing, McLeod Russell, Zee Entertainment, Cox & Kings, Café Coffee Day and now CG Power raise some concerns for bank NPAs.