M K Shukla & Rakesh Ranjan By 11 AM this morning, February 6, the S&P Sensex and the Nifty50 slumped nearly 3% in sympathy with Wall Street that suffered its biggest decline since 2011 as bears hammered the market on concerns about a higher US inflation and potentially higher interest rates. The trigger for the sell-off was a sharp rise in US bond yields following last Friday's data that showed US wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and consequently higher interest rates. At 11.15 AM., the Sensex was seen recovering ground trading lower at 981.95 points or 2.83% at 33,777.34 and the Nifty down 297.20 points or 2.79% at 10,369.35. In Monday trading on Wall Street, both the S&P 500 and Dow Industrials indices slumped more than 4%, as the Dow recorded its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erasing its gains for the year. The declines for the benchmark S&P 500 index and the Dow Jones Industrial Average were the biggest single-day percentage drops since August 2011, a period of stock-market volatility marked by the downgrade of the United States' credit rating and the eurozone debt crisis. How long will Wall Street tremor impact the Indian stock market? Indian markets have been surging ahead creating one milestone after another since late 2013. But the imposition of long-term capital gains tax in the FY19 budget has come as a great dampener for domestic stock market enthusiasts. The LTCG is seen as pickpocketing by the government that has done precious little for the middle class in the last four years of its existence. Of course, there has been persistent talk for some time in a section of the media about a correction as the valuations are said to have been stretched. So this correction, first triggered by the imposition of long-term capital gains without inflation indexation and now reinforced by events on Wall Street, may be seen by bulls as an opportunity to regroup and catch the bears by the tail and squeeze them out. A lot of money has been flowing into the Indian stock market - primarily from domestic middle-class investors who are left with fewer options to park their money with interest rates on FDs decelerating and investment in land and housing becoming mired in the web of inflated GST and stamp duties. So one may only hope that Wall Street tremors may fizzle out in a week or so. But if they don't and the Indian stock markets remain stubborn in defiance of the government's irrational LTCG policy, the government would find itself in pain because its PSU disinvestment plan for FY19 may go haywire. A slump in the stock market may also hurt revival of the economy and throw it off gear from the path of growing at 7-8% in FY19. That may not augur well for the ruling party that has to face the people in 2019 on the basis of its real and visible performance.