Politics and inflation see Indian shares fall 3.71 percent

MUMBAI, July 1, 2008 (AFP) – Indian shares plunged 3.71 percent on Tuesday, closing below the 13,000-point mark, hit by worries about early general elections, inflation and oil prices, dealers said. The benchmark Mumbai 30-share Sensex index fell 499.92 points to 12,961.68, a 14-month low.

“Political uncertainty and rising inflation are dragging the markets down. We could see a further dip of about 400 points,” said Bhaskar Kapadia, a partner at brokerage Pyramid Securities.

Tension between the communists and the ruling Congress coalition have been running high over a controversial nuclear pact with the United States, fanning fears of snap elections.

Stocks have also been hit by worries that soaring crude oil prices will hit input costs for companies and drive down profits.

Interest rate-sensitive property, automobile, banking and metal stocks fell, on concerns of further monetary tightening.

The Reserve Bank of India will meet for its next policy-making meeting on July 29.

Last Tuesday, the bank raised its repo rate — the rate at which commercial banks borrow funds from the central bank — to 8.5 percent from 8.0 percent.

It also announced a two-stage hike of th