An Indian stock dealer reacts while monitoring share prices at a brokerage firm in Mumbai, 27 Jun 2008

India's key stock market index has fallen more than 3.5percent because of concerns about rising inflation and politicalinstability.

Mumbai's Sensex index lost 500 points Tuesday to close at 12,962, its lowest in more than a year.

Indianbanks were among the hardest hit in the sell-off, including State Bankof India, which lost 7.8 percent, and ICICI Bank, which declined 6.5percent.

The surging price of crude oil worldwide has added toconcerns about India's inflation rate, which is at a 13-year high. InJune, the Indian government raised the price of gasoline and dieselfuel to help state oil companies stay profitable.

Analysts saytensions between India's ruling coalition and the communist partiesover a proposed nuclear pact with the United States also contributed toTuesday's stock sell-off. The communist parties have threatened towithdraw support for the ruling coalition and force early elections ifthe pact is passed.


Some information for this report was provided by AFP, and Bloomberg.