New Delhi: Indian equity indices came under sharp selling pressure for the second consecutive day on Tuesday and wiped out all previous week's gains.

Sensex tanked 642.22 points, or 1.73%, to end at 36,481.09 while Nifty tumbled 186 points, or 1.69% to 10,817.6.

Investor wealth eroded by 2.72 lakh crore in two days as soaring crude oil prices in the wake of rising geopolitical tensions in the Middle East led to severe selling in the equity market. Led by the heavy selling in the market, the market capitalization (m-cap) of BSE-listed companies eroded by 2,72,593.54 crore to 1,39,70,356.22 crore, PTI reported. The BSE gauge had on Monday settled 262 points lower.

At the National Stock Exchange, all sectoral indices were in the red with Nifty auto down by 3.8%, realty by 3.7%, PSU bank by 3.6% and metal by 2.6%.

Banking stocks too were under pressure with Axis bank down by 4.6%, State Bank of India by 3.7% and IndusInd Bank by 3%.

Of the 30 scrips of the BSE gauge, HUL, Asian Paints and Infosys were the three gainers. In the broader market, the S&P BSE small-cap and mid-cap indices fell by up to 1.84 per cent.

Shares of State Trading Corporation (STC) and Metals & Miners Trading Corporation of India (MMTC) plunged by 19.6% and 16.5% respectively following reports that the Ministry of Commerce and Industry has decided to close down the state-owned trading firms, PTI reported.

Piyush Goyal on Tuesday said all options are open with the ministry for closure or merger of three public sector undertakings - MMTC, STC and PEC.

Here are five reasons why the markets dropped at such an alarming rate.

1) Geopolitical tensions: Market sentiment has been weak since two Saudi Aramco plants at the heart of the kingdom's oil industry, including the world's biggest petroleum processing facility, were attacked by drones on 14 September. India's current account and fiscal deficit could take a hit if oil prices continue to rise after the attack, RBI Governor Shaktikanta Das had said on Monday, ANI repored.

The attack on the two plants -- Abqaiq oil processing facility and Khurais oil field -- resulted in a temporary shortage of 5.7 million barrels per day which is 5% of the global crude supply or 50% of the kingdom's oil output. Oil marketing companies fell 3-4% as crude surged to $69 per barrel.

After soaring as much as 20% to $71.95 per barrel on Monday, Brent crude futures corrected slightly to trade at $67.97 per barrel on Tuesday.

"The rampant sell-off across the horizon for second consecutive day resulted in complete erosion of previous week's gains. The sudden spike in oil prices on account of drone attacks on Saudi Arabia establishments has definitely disrupted sentiments as it tends to adversely impact current account and fiscal deficit, thereby deterring the path of recovery for an economy that is already immersed in a slowdown," Nischal Maheshwari, CEO – Institutional Equities, Centrum Broking said.

2) Rupee approaches 72: The Indian rupee has also weakened sharply and moved towards 72 against the US dollar amid rising demand for the greenback vis-a-vis other currencies overseas and concerns over soaring crude prices following the drone attacks.

"Investors are panicking due to fears that crude may rise further," Yogesh Nagaonkar, founder and chief executive of Rowan Capital Advisors in Mumbai, told Reuters.

"The underlying tone of the market is already bearish due to slowdown worries and lack of action from the part of the government to counter this, and the crude surge is worsening the situation."

3) Banking stocks bleed: Banking stocks too were under pressure with Axis bank down by 4.6%, State Bank of India by 3.7% and IndusInd Bank by 3%.

Private-sector lender Axis Bank Ltd fell to its lowest closing level since 7 January.

4) Auto stocks under pressure: With the GST Council meet scheduled for the 20 September and as lower chances of rate cut are looming, the auto stocks came under pressure on Tuesday. Hero MotoCorp skidded by 6.2%, Tata Motors by 4.9%, Maruti by 4.6%, Eicher Motors by 3.3% and Bajaj Auto by 3%. Two-wheeler maker Hero MotoCorp Ltd suffered its worst session in nearly 14 months.

Kotak Securities said that a temporary cut in GST rate, say for six months, is not going to revive industry demand

"Given limited fiscal space, we ascribe very low chances for a GST rate cut. However, the positive impact on auto companies’ financials could be significant if 10% GST rate cut in the auto sector is given for an extended period of time," Economic Times quoted the report.

5) Global cues: Global markets also turned cautious ahead of the two-day meeting of US Federal Open Market Committee. Many experts said the Fed may cut interest rate by 25 basis points.

Asia markets were mixed in the trade as investor sentiment remained cautious with China's Shanghai falling by 1.7% and Hong Kong's Hang Seng declining by 1.2%. Chinese benchmarks led declines in Asia after the credit ratings agency Moody's downgraded Hong Kong, citing its recent political turmoil.