Sensex dips 370 points on interest rate hike fears

MUMBAI: The benchmark 30-share Sensex index fell 370.87 points to 10,042.06 from Sunday's close, in a late afternoon sell-off sparked by concerns that global interest rates will be hiked to tame rising inflation, dealers said.

There was a one-hour special trading session to test new software on Sunday.   

They said inflation concerns in India have heightened since prices rose above five percent for the first time in a year, which may prompt the central bank to follow an expected hike in US interest rates this week.   

The decline snapped four straight gains for the Sensex.   

"The markets turned nervous towards the close on a fresh funds sell-off. We could see a sharp correction this week with a crucial Fed meeting outcome awaited," said Soumeel Chakravarthy, a dealer with equity research firm Ambit Capital.    

On Friday, Indian wholesale inflation was reported to have jumped to 5.24 percent for the week ended June 10 from 4.72 percent the previous week, on the back of large increases in fuel and food prices.   

The figures were released a day after India's federal cabinet halted the export of lentils and allowed private players to import wheat and sugar in an effort to contain prices of food items which have shot up in the past few weeks.   

On June 5, India raised petrol prices by just over nine percent and diesel by more than six percent to offset higher global oil prices.