Sensex falls for third day; what frightens investors on D-Street?

Major driving factors for the present fall are:

Global mood sours

Asian stocks extended declines as a rout in China and a mixed response to major US technology earnings spurred caution across the globe, including in India.

US stock futures, the S&P 500 e-minis, were flat.

Caution ahead of Fed meet

Market participants were wary of placing large bets prior to the key events in the markets such as central bank policy action and F&O expiry.

On the global front, Street will be watching closely for any hints on when the Fed will start reducing its purchases of government bonds and any fresh insight into its views on inflation and economic growth when it announces its outcome later in the evening. In India, the F&O expiry on Thursday and the RBI policy next week is also luring investors to stay on the sidelines.

FIIs on a selling spree

The foreign institutional investors have once again turned sellers on Street after hefty buying witnessed in the last two months. So far this month, FIIs have offloaded Rs 8,000 crore from Indian equities as markets trade at all-time high levels and valuations remain a concern.

IMF growth downgrade

The sentiment on Street also took a beating after the International Monetary Fund on Tuesday forecasted India's economy to grow 9.5 percent in 2021-22 - a cut of three percentage points from its earlier forecast - citing a lack of access to vaccines and renewed waves of Covid-19 cases.