The Indian stock markets witnessed a bloodbath on Tuesday as markets opened for the first time after the government data suggested a sharp deceleration in the growth numbers.

The rout in the Indian markets was led by the foreign investors who continue to be negative on India, despite the removal of surcharge levied on them by the government in the budget. The foreign investors withdrew a net of Rs 2,016.2 crore from Indian equity markets during the day.

All the indices on Bombay Stock Exchange ended in the red – ranging from 1.32% loss for small-cap and 2.08% loss for the Next 50 index.

The 30 share benchmark index of BSE, Sensex wiped off all the gains it had made last week and closed 770 points (2.06%) down at 36,562.91. The Sensex had made a weekly gain of 632 points last week – its first since the Budget presented by Finance Minister Nirmala Sitharaman triggered a sell-off in the markets. Of the 30 stocks listed on BSE, 28 ended the day in red – though IT stocks performed relatively better.

The overall sentiment was also heavily negative in the markets. The BSE witnessed 1,613 declines against 817 advances. Also, as many as 207 scrips on the BSE touched a 52-week low.

On the National Stock Exchange, all sectoral indices ended in the red – which PSU Bank index being the biggest loser, tanking by 4.87 %. The banks, whose merger was announced on Friday shred up to 11%. “You're clubbing better performing banks with banks under prompt corrective action. So, how can markets take it positively,” an analyst said.

The benchmark index of NSE, Nifty-50 closed the day with a loss of 225.35 points (2.04%) at 10,797.90.

On the other hand, as foreign investors continued to sell their holdings in India, the demand for dollar kept going up throughout the day. The Indian currency, which had opened 55 paise lower against the greenback, kept depreciating through the course of the day to close 72.10, 100 paise lower.

Analysts attributed the sell-off to the weak macros in the economy, coupled with a bleak outlook in the markets. The government data, on Friday, reported a deceleration in growth number for the fifth consecutive quarter.

The rupee gained 38 paise to close at a two-week high of 71.40 against the US dollar, on Friday, on renewed hopes of US-China trade talks.

The yield on the government 10-year bond fell on Tuesday, raising bets for deeper interest rate cuts by the Reserve Bank of India.

In the first 15 minutes of trade, the 10-year bond yield was down 6 basis points at 6.495% compared with Friday's close of 6.559%. However, during the day, the yields stabilised a bit to close at 6.516%.

Bond yield and prices move in opposite directions.