Indian share prices plunged on Monday to close 5.12 percent lower on concerns about the United States economy and amid a sharp sell-off across Asia, dealers said. They said investors were worried about the prospect of slower overseas investment into emerging markets like India.
The benchmark 30-share Mumbai stock exchange Sensex index fell 900.84 points to 16,677.88, which was its second sharpest ever fall by points. Banking and power stocks fell the most.
"Near-term US market trends will be watched. We advise retail investors to stay on the sidelines," said Apurva Shah, the head of research with brokerage Prabhudas Lilladher.
Since the start of the year foreign investors have been net sellers of 2.8 billion dollars worth of Indian equities, official data showed Monday. The country's largest lender, State Bank of India (SBI), fell 186.3 rupees or 8.83 percent to 1,923.4.
Dealers said there were concerns of whether the government would provide financial aid to state-run banks after it announced a 15-billion-dollar loan bailout for small farmers through a pre-election budget last Friday.
India's Finance Minister Palaniappan Chidambaram has still to outline how banks would be compensated for the waiver of loans owed by farmers, they said. Some analysts have already downgraded banks including SBI, Punjab National Bank and Canara Bank, major lenders to farmers.
Losers led gainers 2,330 to 396 on volume of 50.9 billion rupees (1.27 billion dollars). The rupee weakened against the dollar to 40.26 from 39.9 and also fell against the euro to 61.26 from 60.63. India's top property firm DLF fell 65.85 rupees or 8.44 percent to 714.7.
Online brokerage firm Indiabulls Financial Services fell 66.3 rupees or 10.78 percent to 548.8 on concerns of lower profitability after the government last week hiked the tax on short-term capital gains to 15 percent from 10 percent. State-run engineering firm Bharat Heavy Electricals fell 182.5 rupees or eight percent to 2,099.45.