The rapidly deteriorating US economy once again haunted the world capital markets. As fears of a possible recession in the world?s largest economy resurfaced on Monday, the Indian equities fell. The benchmark indices succumbed to weak cues from the US and Asian markets and posted their second biggest losses in a single session. The Sensex fell 900.84 points, or 5.12%, to close at 16,677.88 points while the S&P CNX Nifty plunged by 270.5 points, or 5.18%, to close at 4,953 points.

Indian markets posted their worst fall on January 21, when Sensex lost 1,408 points and S&P CNX Nifty 496.5 points.

The provisional data of stock exchanges (SEs) showed that FIIs were net sellers in equities worth Rs 711.31 crore while the domestic institutional investors (DIIs) were net buyers of Rs 80.47 crore on Monday. In 2008, till date FIIs have sold equities worth $2.8 billion in Indian markets, while in February alone, in Taiwan, they were net buyers to the tune of $3.25 billion.

Indian markets opened on a negative note, reacting to weak cues from the US markets which had plunged on Friday, after insurer AIG reported its biggest loss and weak economic reports heightened worries of an impending US recession.

Reports from UBS, which said sub-prime write-downs of various players might reach $600 bn, further dampened investor sentiments.

Some experts believe sentiments in local markets are really weak, especially after the Budget proposed an increase in the short-term capital gain tax from 10% to 15%. This would keep day traders at bay and hit volumes .

Among Asian markets, barring China?s Shangai Composite, other Asian markets ended in deep red with Hong Kong?s Heng Seng losing 746.70 points, or 3.07%, to close at 23,584 points and Japan?s Nikkei 225 losing 610.84 points, or 4.49%, to close at 12,992.18 points.

Amitabh Chakravorty, head equities, Religare Securities, said, ?Markets started with a negative note on Friday following sharp fall in overseas market. Budget proposals have rattled many FIIs and arbitrageurs, which led to pervasive selling but without much volume.?