Indian stocks fell more than 2% on Tuesday as foreign institutions continued to pull out amid growing evidence of a slowdown in China and warnings bells over global economic growth this year. IMF chief Christine Lagarde warned that global growth will be weaker than previously expected and that emerging economies should be alert to potential shockwaves from China\u2019s slowdown. Lagarde said she feared a \u2018bumpy\u2019 ride and warned that global growth was weaker than hoped, as China\u2019s manufacturing shrinks at fastest rate since 2012. The IMF chief also told an audience in Indonesia that Asian economies could continue to lose momentum following recent turmoil on global markets, which have been shaken by fears over China\u2019s economic outlook. The Sensex ended at its lowest level in more than a year, led by banking stocks. The gauge of top-30 companies ended at 25,696.44, down 586.65 points or 2.23%. The Nifty lost 185.45 points, or 2.33%, to settle at 7,785.85. Saurabh Mukherjea, CEO, institutional equities, Ambit Capital, said Indian stock markets stand exposed amid a high likelihood of the Chinese central bank embarking on a continued devaluation of the yuan. \u201cIndian products losing their competitiveness to their Chinese counterparts; and rising risks to India\u2019s $0.5 trillion of foreign currency debt. Such a scenario could be a catalyst for more pullbacks in the Sensex with the trailing P\/E multiple likely to drop to 14x (as seen in the Lehman crises), implying a Sensex level of 22,000,\u201d Mukherjea added. Foreign portfolio investors (FPIs) sold equities of $102 million on Tuesday, provisional data from the stock exchanges showed. FPIs have sold in the last 21 out of 26 sessions as foreigners pulled out record quantum of money in August since October 2008. Morgan Stanley trimmed its year-end Sensex target, following similar moves by other Indian and foreign firms last week. The American investment bank on Tuesday reduced its Sensex target to 28,800, with risks of a further decline to 22,800. In Asia, Japanese main stock average \u2013 the Nikkei 225 \u2013 ended down nearly 4% after data showed Japanese investments in new plant and equipment dropped because of concerns about demand from China. Shares in mainland China fell 1.3%. In Hong Kong, stocks fell more than 2% after Chinese manufacturing showed further signs of weakness, adding to evidence of a massive slowdown in the world\u2019s second biggest economy. Stocks in other Asian economies like South Korea, Indonesia, Singapore, Taiwan, and Thailand fell 1-2% each. Major European indices were down 2-3% following the double-whammy from slowdown in China's and Europe's manufacturing growth. Manufacturing PMI growth in major western Europe such as Spain, Germany, Italy, Austria, France, Netherlands, Ireland, and Greece fell to multi-month lows. US futures were down 2%, extending losses in what is the worst months since 2012. Back home, all sectoral indices ended with deep cuts on the back of domestic and global factors. Market breadth was weak as 29 of the 30 Sensex companies declined. In all, 2,122 shares ended weak against 574 stocks that ended positive on the BSE. Economists are still perplexed by India\u2019s GDP, as economic growth in Asia\u2019s third-biggest economy slowed to 7% in April-June, down from 7.5% the previous quarter. Banking stocks were the biggest losers. Analysts linked the selloff in banking stocks to the sharp 35-bps base rate cut announced by HDFC Bank on Monday, which could hurt net interest margins of other lenders. HDFC Bank has the lowest base rate among big lenders after Monday's cut. HDFC Bank shares fell 3%, while Axis Bank fell more than 5%. SBI, the country's largest lender lost 3.25%, while state-owned Punjab National Bank plunged more than 7%. Bloomberg data showed that PSU banks saw their valuations dip to new lows. On the back of a 4.5% fall in the CNX PSU Bank index, the price-to-book-value ratio (PBV) of the index declined to its lowest since February 2013. Bank of India, Canara Bank and Oriental bank of Commerce, which lost 5%-7% of their value on Tuesday, traded at their lowest PBV in seven years in the range of 0.27 to 0.34. Even Indian Overseas Bank, IDBI bank and Allahabad Bank that traded at 0.26 to 0.32 times their book values stood near their August 2013 lows. Private sector banks, meanwhile, continue to do better with majors like HDFC Bank, Indusind Bank and Kotak Mahindra Bank nearly four times their respective book values despite falling 5%-8% of their share values since market peak of January 2015.