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 3.5 percent because of concerns about rising inflation and political instability.

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

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

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

Analysts say tensions between India's ruling coalition and the communist parties over a proposed nuclear pact with the United States also contributed to Tuesday's stock sell-off.  The communist parties have threatened to withdraw support for the ruling coalition and force early elections if the pact is passed.


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