Sensex plunges 365 points

The index opened nearly 200 points lower and witnessed an intra-day fall of 474 points before recovering to close the day at 16,501.74,down 365.23 points or 2.17 per cent

Weak July factory output growth at 3.3 per cent,rising concern over euro zone debt problems and fears of an impending interest rate hike by the central bank pulled the Sensex down to two-week low on Monday.

The index opened nearly 200 points lower and witnessed an intra-day fall of 474 points before recovering to close the day at 16,501.74,down 365.23 points or 2.17 per cent.

The selling was so strong that all 13 sectoral indices closed with losses of up to 3.43 per cent,with consumer durables,metals,IT,realty,banking,auto and capital goods taking bit hits.

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In all,27 of the 30 scrips in the Sensex ended in the red.

The broader Nifty at the National Stock Exchange also tumbled 112.65 points or 2.23 per cent to end below the psychological 5,000-mark at 4,946.80.

While the markets opened weak following weakness in the Asian markets,the fall got pronounced as a result of a less-than-expected 3.3 per cent growth in the industrial output for the month of July (lowest in 21 months) taking everyone by surprise and sending signals of a slowdown in growth.

Later this week,the Reserve Bank of India is scheduled to review its monetary policy and markets are full of apprehension whether the RBI will continue with its repo rate hike stance to tame inflation or will take a pause to push growth. Experts say that the RBI is likely to keep its focus on addressing inflation.

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For the RBI,ultimately inflation will act as the deciding factor, said Abheek Barua,chief economist at HDFC Bank. Continued deceleration of IIP numbers is alarming and it precedes a slowdown. However I expect growth in the last quarter of this fiscal.