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Markets fall to 10-month low

The stock market plunged to a 10-month low, as investors’ sentiments remained subdued amid rising inflation and its consequent impact on corporate earnings.

business Updated: Jun 23, 2008 20:17 IST

The stock market plunged to a 10-month low on Monday, as investors’ sentiments remained subdued amid rising inflation and its consequent impact on corporate earnings. The benchmark index of the Bombay Stock Exchange, the 30-share Sensex, fell 277 points, or 1.9 per cent, to close at 14,273. On the National Stock Exchange, the broader 50-company Nifty index fell in the same order to close at 4,266.

Monday’s fall was led by infrastructure companies and metals stocks. Jaiprakash Associates lost 8 per cent, while aluminium major Hindalco fell 7.9 per cent.

The capital goods index dropped 5.3 per cent and the metal index lost 4.6 per cent. On the other side, information technology was the only sector that saw a rise --- it rose by 0.68 per cent.

The market over the past few trading sessions has been falling under inflationary pressures, primarily driven by the rise in oil prices and mounting pressure on corporate profitability.

On Friday, it tumbled 517 points as news came in that inflation had touched a 13-year high of 11.05 per cent.

“I expect the market to remain under pressure for about a year,” said Nilesh Shah, deputy managing director, ICICI Prudential AMC.

Fear factor is driving the market and even though the valuations are low there are few buyers in the market. Sensex is currently trading at a price earning multiple, or the PE ratio, of 17.4.

The last time that Sensex traded below this multiple was two years ago on June15, 2006.

“Even though the valuation is low, we don’t know where the fall will stop and this fear is keeping the investors away,” said Manish Bandi, vice president, India Infoline.