Bears made a re-entry on September 25, driving the Sensex 500 points lower after a spectacular rally that ensued following the fiscal booster on September 20. Rampant selling was seen across sectors except IT.

The BSE Sensex was down 503.62 points or 1.29 percent at 38,593.52, and the Nifty fell 148 points or 1.28 percent to 11,440.20.

Bears maintained their hold on the broader markets too, as Nifty Midcap and Smallcap indices plunged 2 percent each. The market breadth was also in favour of bears as about two shares declined for every share rising on the BSE.

"Indian benchmark indices are trading near peak valuations and sustainability at this level is essential. Therefore, investors would closely monitor the movement in the coming sessions, as volatility would remain high," Ajit Mishra Vice President, Research at Religare Broking told Moneycontrol.

The volatility is expected to be high due to the expiry of September futures & options contracts on September 26. Traders will close their current series positions and roll over to next series.

Here are five key factors weighed on the market:

Political uncertainty in US

Global sentiments turned negative after US lawmakers, on September 24, called for an impeachment inquiry into President Donald Trump, increasing the prospects of prolonged political uncertainty in the world's largest economy.

The dramatic move by House of Representatives Democrats dented investors' sentiment which was already shaken by fresh US-China trade worries.

Nancy Pelosi, the speaker of the House of Representatives, said that Trump betrayed his oath of office by seeking help from a foreign power to hurt Democratic rival Joe Biden.

Trump had reportedly attempted to pressure the incoming president of Ukraine, Volodymyr Zelensky, to open a corruption investigation into Biden and Biden's son Hunter, who had done business in the Eastern European country.

However, Trump has denied the claims, saying he would release the full transcript of the controversial call. "I have authorized the release tomorrow of the complete, fully declassified and unredacted transcript of my phone conversation with President Zelensky of Ukraine," Trump said in a series of Tweets.

A Reuters report suggests that it is unlikely that the impeachment inquiry would lead to Trump's removal from office.

Globally, markets were caught in a bear trap after this news. Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indices ended 0.5-1.5 percent lower in previous session.

US Conference Board Consumer Confidence Index declined to 125.1 in September from 134.2 in August also weakened sentiment.

Rising Worries Over US-China Trade Deal

Asian markets ended lower with China's Shanghai Composite, Hong Kong's Hang Seng and South Korea's Kospi fell a percent each. Japan's Nikkei was down 0.4 percent.

European markets also traded with a percent lower at the time of publishing this copy.

The impeachment inquiry into President Donald Trump and rising worries over US-China trade deal have soured market sentiment.

Trump is hopeful about a deal but took a harsh tone about China's trade practices at the United Nations General Assembly, saying, he would not accept a 'bad deal' with Beijing. The comments come ahead of fresh talks between the world's largest economies in October.

In a reply, Chinese Foreign Minister and State Councilor Wang Yi said both countries should cooperate for mutual gain.

Since 2018, US and China have been applying tariffs on billions of dollars worth of each other's goods, which created uncertainty and raised worries over global growth concerns.

Further Sell-Off in Banks

Stocks like banking, financials and auto, which rallied the most after the September 20 announcements, continued to see selling pressure on profit booking. The Nifty Bank fell around 3 percent in two straight sessions after rising 14 percent in previous two consecutive sessions. The Nifty PSU Bank fell the most among sectoral indices, losing 5.6 percent.

The reason for the fall in banks shares could be fresh concerns in the sector after the irregularities in lending by Punjab and Maharashtra Cooperative Bank (PMC Bank). Underreporting of non-performing assets or higher than permitted exposure to same group accounts could have led RBI to take the step. An inspection is currently underway.

Bank of India, State Bank of India, Union Bank of India, Canara Bank, Bank of Baroda, PNB, Indian Bank, Allahabad Bank and OBC were down 3-8 percent while Yes Bank, RBL Bank, Kotak Mahindra Bank, HDFC Bank, ICICI Bank and Axis Bank were down 1-8 percent.

Auto Stocks Under Pressure

Auto stocks were also under pressure today with Nifty Auto falling 4 percent after Maruti Suzuki announced a further discount of up to Rs 5,000 on its vehicles following the corporate tax rate cut.

Passenger vehicles have been sold with around 3-5 percent discount and commercial vehicles at 10-20 percent discount. The current additional discount by Maruti to pass on benefits of corporate tax rate cut is with the intention to revive demand but if the additional discount fails to revive demand then there could be pressure on companies' margin.

Technical View

The Nifty50 lost nearly 150 points and formed bearish candle which resembles a Bearish Belt Hold kind of pattern on daily charts as it remained under selling pressure from the word go.

"Nifty50 has almost made an attempt to bridge the bullish gap present in the zone of 11,471–11,382 levels registered on September 23," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said, "As these gap zones (11,471–11,382) act as support levels, going forward it looks imperative for bulls to sustain above this bullish gap zone on closing basis to re-establish their strength. On such stability, ideally, index should resume its uptrend with initial targets of 11,695."

Contray to this a failure to sustain above 11,382 on closing basis should be considered as an initial sign of weakness which may then eventually accentuate the selling pressure further towards its 200-day simple moving average whose value is placed around 11,240 levels, he added.