The ripple effect of the world markets continued on the Indian stock markets on Tuesday as well. The key indian indices tracked their global counterparts for the second day in row to end the day dip in the red. After opening with a slight positive gap, the 30-share Sensex of the Bombay Stock Exchange (BSE) moved in the range of 589.49 points before finally settling for 16,339.89 points, down by 337.99 points or 2.03% while the broader S&P CNX Nifty of the National stock Exchange (NSE) fell by 88.75 points or 1.79% to close the day at 4,864.25 points.

The Sensex has lost 1,238 points while NIfty has tanked by 358 points in last two trading sessions. Among the Asian markets, except Japan, which closed flat, all other major markets ended the day in the red.

Sashi Krishnan, CIO, Bajaj Allianz, said, ?The markets are reacting to the day to day cues from the global markets and the short term volatility is going to prevail. However we from insurance fraternity are doing some value picking at these levels as we still believe the long term prospects of Indian economy is still intact.?

Meanwhile, the stocks from the Banking sector continued to witness selling pressure at the back drop of unclear process of reimbursing money to the lender banks as the government offered a Rs 60,000 crore conditional waiver to the farmers. BSE Bankex plunged by 377.68 points or 4% to end the day at 9,056.76 points while BSE Realty also fell by 486.54 points or 5.43% to close the day at 8,467.41 points.

According to dealers, there is another angle to sell-off in the banking and reality stocks. The time is ripe for the RBI to cut the interest rate, following the global developments and also in the wake of another 75 bps cut expected from US Fed. However, with the possibility of inflation going out of control, RBI is not moving on the interest rate front, that is hurting the banks more as there is a possibility of more credit off-take from the industry (including the real estate sector) but not at the current rate of interest but slightly reduced rate.

BSE Auto and Metal bucked the trend managing to end the day in positive terrain.