Volatile oil prices, heightened fears of rising inflation and overall economic slowdown weighed on markets worldwide, causing the Sensex tumble 506 points, or 3.3 per cent, to close at 15,066.
The crash followed a 5.2 per cent slide through last week, triggered by the government’s
decision to increase prices of diesel, petrol and LPG, a hike that is expected to fuel inflation further and hit growth and profits.
“The market is not sure of the impact inflation and oil prices will have on growth,” said Amitabh Chakraborty of Religare Securities. “We advise investors to be on the sidelines.”
Indeed, barring in Brazil, Russia and a few other countries, investors worldwide are shying away from the market.
The bearish mood worsened after US government data released on Friday showed a rise in unemployment in the world’s largest economy, and crude oil prices jumped to a new high of $139 per barrel.
Friday’s fall on Wall Street gave cues to markets across Asia as they opened for trading on Monday. The market fell 2.1% in Japan, 0.7% in China, and 2% in Singapore.
In India, FIIs have been pulling out. Between January and June, they have pulled out $4.9 billion, against an outflow of $1.4 billion for the same period in 2007.