Indian stocks extended their losses for the fifth straight session on Monday, tailing a rout in global markets, as investor sentiment continued to remain subdued following the introduction of long-term capital gains (LTCG) tax on equities in the Union budget.

BSE’s 30-share benchmark Sensex shed 309.59 points, or 0.88%, to close at 34,757.16 points. The National Stock Exchange’s 50-share Nifty dropped 94.05 points, or 0.87%, to close at 10,666.55 points.

Equity markets across the globe traded weak on Monday, with bond yields rising on concerns that higher US inflation could prompt global central banks to turn more hawkish than earlier expected. Strong US job data also led to speculation that the US Federal Reserve may boost interest rates when its rate-setting panel meets on 21 March.

Japan’s Nikkei index closed 2.55% lower, while the UK’s FTSE 100 had fallen 0.98% as of 3.43pm in London.

“A combination of hardening yields, weak global equity market and LTCG tax coming back is weighing on our market," said Vaibhav Sanghavi, co-chief executive, Avendus Capital Public Markets Alternative Strategies Llp. “The market will wait for various domestic and global data points for more clarity. We need to closely watch how domestic flows pan out and how the macro parameters play out. Globally, bond yields and dollar movement are key."

So far this year, foreign institutional investors have bought a net $2.22 billion worth of Indian stocks, while domestic institutional investors have invested around Rs400 crore.

“The turbulence in the US bond and equity markets is key," said Ajay Bodke, chief executive and chief portfolio manager at brokerage Prabhudas Lilladher Pvt. Ltd.

On Friday, US 10-year bond yields had risen to a four-year high of 2.84%.

“Domestically, crude oil prices, inflationary trends, government’s management of the fiscal situation, and most importantly, the momentum of revival in corporate earnings will determine the course of the Indian market," said Bodke.

Crude oil prices have surged 31% in the past six months and could worsen India’s current account deficit and fiscal deficit. The Reserve Bank of India (RBI)’s interest rate decision on Wednesday will also be closely watched.

Analysts expect RBI to keep interest rates on hold on concerns that inflation may accelerate further due to higher crude oil prices and a proposed hike in minimum support prices for farmers.

Of the 15 economists surveyed by Mint, 14 expect RBI to keep repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%. Only one expects a rate hike of 25 basis points. A basis point is one-hundredth of a percentage point.

Of the firms in the BSE 500 index, only 55 have managed to log gains in February. The index has declined 3.6%. Around 45 stocks shed 10% or more of their value this month, while 208 companies dropped 5% or more.

The BSE mid-cap and small-cap indices were the worst hit, falling 4.60% and 5%, respectively, in February.

“Many of the retail investors in the market have been first-time investors in the last two years. This is the first time they are seeing losses and panic has set in," said independent market analyst Ambareesh Baliga.

As market turbulence returns, the volatility gauges are surging. the National Stock Exchange’s India Vix, or volatility index, rose 13.8% in the past two sessions to 16.0525, indicating choppy times ahead.

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