INDIA’S leading share index of blue chip firms plunged 3.65 per cent to a two-year low due to growing concerns about high inflation, slowing growth and evidence of political deadlock.
"The market is in a disaster zone," said Hemen Kapadia, chief executive of investment advisory firm Chart Pundit in the financial capital, Mumbai.
"There is no second-round of reform and rising interest rates and slowing growth are pulling the market down. The government has failed on all fronts."
India`s parliament adjourned for a second day running today (23) at the start of the crucial winter session in which analysts had hoped the government would reinvigorate its pro-business reform agenda.
Only 15 laws have been passed by parliament in the last year due to disruptions caused by the opposition who have been blocking proceedings as a protest against perceived government failings.
The 30-share Sensex on the Bombay Stock Exchange dropped 586.73 points or 3.65 per cent to 15,478.69 intraday – its lowest level since November 3, 2009.
Indian equities are among the worst-performing in the world this calendar year. The Sensex has now dropped nearly 25 per cent in 2011. Foreign investment has also tailed off on fears about the financial climate.
India`s pace of growth has been slowing in recent months due to weakening industrial activity, which has been hit by near-double digit inflation that India`s central bank has been trying to tame by hiking interest rates.
The Reserve Bank of India has put up rates 13 times since March last year but rising food prices, commodities and fuel, plus a weakening rupee against the US dollar, have combined to keep inflationary pressure high.
The rupee has plunged to a record low of 52.73 to the dollar, as fears about eurozone debt and the global economy, as well as falling local stock markets, provoked further selling of the currency.
It strengthened slightly to 51.8 but fell back to 52.2 shortly before 1:00 pm (0730 GMT).
