Indian equity markets came under the bear's grip on Monday with frontline gauges breaching their crucial 9,900 (Nifty) and 31,700 (Sensex) levels on subdued global cues. Markets started the session with a huge gap on the down side, as investors turned jittery on expectation of government to tinker its fiscal deficit target for FY18 by announcing an economic stimulus to revive the economy. Chief Economic Adviser (CEA) Arvind Subramanian has said that Indian economy continues to face multiple challenges and stressed on the need to tackle them on various fronts, such as exchange rate, public investments while maintaining macroeconomic stability. He said that there are lots of challenges ahead with growth slowing down and investment not picking up. He also identified rising level of stressed assets to be a key area of concern. Traders also remained cautious on account of the derivatives expiry due on Thursday and the recent spike in tensions on the Korean peninsula. Adding to the pessimism, foreign investors remained in exit mode as they have already pulled out nearly Rs 5,500 crore from stock markets so far this month due to geopolitical concerns and a tendency to take profit. The net outflow by Foreign Portfolio Investors (FPIs) follows withdrawal of Rs 12,770 crore from equities in August. Prior to that, they had pumped in over Rs 62,000 crore in the past six months. Markets extended southward journey and domestic bourses even went to test psychological 31,500 (Sensex) and 9,850 (Nifty) levels, but the key gauges got some support near those intraday low levels as they managed to trim some of their losses to end off day's lows, as traders took some solace with report that Prime Minister Narendra Modi would unveil the much-awaited stimulus package during a scheduled speech to the BJP national executive meeting later in the day. Finally, the BSE Sensex tumbled 295.81 points or 0.93% to 31,626.63, while the CNX Nifty was down by 91.80 points or 0.92% to 9,872.60.

The US markets closed lower on Monday, on the back of a fresh flare up in tensions between the US and North Korea and a sharp decline in technology shares. North Korean foreign minister Ri Yong Ho, speaking in New York, described President Donald Trump's recent comments about North Korea as clearly a declaration of war, and said Pyongyang has the right to shoot down US bombers. Meanwhile, New York Fed President William Dudley said that the Federal Reserve is on track to gradually raise interest rates given the recent inflation weakness is fading and the US economy's fundamentals are sound, reinforcing the central bank's confident tone. On the economy front, factory output and consumer spending were a negative tug on the Chicago Fed's index of national economic activity for August, while hiring offered a smaller boost last month than in July. The Chicago Fed's national activity index slumped to a negative 0.31 in August from an upwardly revised, but still barely positive, 0.03 in July, in what was yet another turn for an especially volatile measure over the past handful of months. The index's less-volatile, three-month moving average decreased to negative 0.04 in August from a neutral reading in July. The Dow Jones Industrial Average lost 53.5 points or 0.24 percent to 22,296.09, the Nasdaq was down 56.33 points or 0.88 percent to 6,370.59, and the S&P 500 edged lower by 5.56 points or 0.22 percent to 2,496.66.

Crude oil futures extended their gains on Monday, amid growing expectations that producers will extend output cuts sooner rather than later. Traders also cheered signs that the market is starting to rebalance. As Opec members expressed an eagerness to reach a decision this year, fuelling expectations that an extension to the global accord to curb production beyond the March 2018 will be agreed sooner rather later. Though, traders were keeping a close eye on North Korea tensions. North Korean Foreign Minister Ri Yong Ho claimed recent comments by President Donald Trump represent a "declaration of war." Benchmark crude oil futures for November delivery ended higher by 3.1 percent at $52.22 a barrel on the New York Mercantile Exchange. Brent crude for November delivery gained 3.5 percent to $58.87 a barrel on the ICE.

Indian rupee breaching 65-mark ended considerably weaker against dollar on Monday, on increased demand for the American currency from importers and banks amid foreign fund outflows. Traders were cautious with Chief Economic Adviser Arvind Subramanian's statement that Indian economy continues to face multiple challenges and stressed on the need to tackle them on various fronts, such as exchange rate, public investments while maintaining macroeconomic stability. Besides, strength in the US dollar against some other currencies overseas along with massive losses in domestic equity markets, largely kept domestic unit under pressure. On the global front, Sterling rebounded on Monday, having slid on Friday after a speech by Prime Minister Theresa May failed to offer the kind of detail investors had been looking for to remove political uncertainty that has kept the currency under pressure. Finally, the rupee ended at 65.11, 32 paise weaker from its previous close of 64.79 on Friday.

The FIIs as per Monday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 6843.09 crore against gross selling of Rs 5861.91 crore, while in the debt segment, the gross purchase was of Rs 713.69 crore with gross sales of Rs 982.59 crore.

The US markets continuing their sluggish trend ended lower in the last session, with the tech-heavy Nasdaq showing a particularly steep decline, amid geopolitical concerns after North Korean Foreign Minister Ri Yong Ho claimed recent comments by President Donald Trump represent a "declaration of war." The Asian markets have made a mixed start with some indices trading in red after a fresh trigger from North Korea sent investors back into haven assets, with focus returning to comments from central bank policy makers. The Indian markets fell further in the last session and the major averages lost another about a percent over fiscal deficit concern, after reports emerged that the government is planning a big stimulus. Today, the start is likely to remain cautious tracking mixed global cues, also as the rupee crashed to a six-month low at 65.12 to the dollar in last session, however, traders will be getting some support with Prime Minister Narendra Modi constituting an Economic Advisory Council in a bid to bring in economic reforms. NITI Aayog member and a former professor at the Centre for Policy Research, Bibek Debroy has been appointed as Chairman of Economic Advisory Council. It will address issues of macroeconomic importance' and present its views to the prime minister. Meanwhile, Finance Minister Arun Jaitley has said that government is planning measures to revive economic growth. There will be buzz in the auto sector, as the Road Transport and Highways Minister Nitin Gadkari has hinted that automobile industry could continue exports of petrol and diesel cars even as government will go ahead with its plan to transition India to all-electric mobility by 2030.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• SBI has launched the FTSE SBI Bond Index series in partnership with global index provider FTSE 100.
• Power Grid Corporation of India will commence commercial operations of 1,500 MW second pole of Champa-Kurukshetra high-voltage direct current line.
• Maruti Suzuki India's Dzire, in its new avatar, has emerged as the best-selling model in the country for the first time in August, taking the pole position from its sibling Alto.
• Lupin has received final approval for its Clobetasol Propionate Lotion, 0.05% from the USFDA to market a generic version of Galderma Laboratories, L.P.'s Clobex Lotion, 0.05%.