Sensex down 400 points: 4 key factors that will steer markets this week

Mid and smallcaps, which rallied 48% and 60% in 2017, were hit very hard, losing nearly 9% and 8% during the week, respectively.

Benchmark indices lost nearly 3% last week on caution that Union Budget could push up inflation and prompt the central bank to raise interest rates soon. That apart, imposition of long-term capital gains tax, through grandfathered till January 31, 2018, also spooked investors.

Finance Minister Arun Jaitley, delivering his last full annual budget before a general election to be held by May next year, raised government spending for rural areas and support to farmers, while slowing the pace of fiscal consolidation.

A cautious stance at the RBI would increase the probability of interest rate increases in the coming fiscal year.