BOMBAY, India – India's benchmark stock index tumbled more than 10 percent Monday, hitting its daily drop limit and triggering a one-hour halt to trading, as investors dumped blue chips that have surged over the last year.
The 30-share Sensex plunged 1,111.70 points — the biggest point drop — or 10.2 percent, to 9,826.9, in two hours of trading Monday morning. On the rival National Stock Exchange, the 50-share S&P Nifty index fell 350.45 points, 10.8 percent, to 2,896.45.
The Sensex has fallen 20 percent since reaching an all-time high of 12,612, points on May 10, nearly double where it was last April.
Many believe the market has climbed too high too fast.
"What has happened is a certain amount of nervousness in the market. My advice to retail investors is to stay invested," said Finance Minister P. Chidambaram.
Among blue chip stocks Oil & Natural Gas Corp., or ONGC, tumbled 8.1 percent at 1,185 rupees, while Reliance Industries fell 11.1 percent to 868 rupees.
As trading resumed after the one-hour break, the stock prices appeared to be bouncing back.
Chidambaram also attributed the fall to the pressure on brokerages to sell because of margin calls.
A margin call is a demand made by a broker to an investor if securities he bought with borrowed money fall in value beyond a certain point. The investor is either forced to deposit more money in the account or sell off some of his assets to meet the shortfall.
He said he had information that mutual funds were buying and "they will continue to buy."
Sushil Choksey, a Bombay-based analyst, said "the buy side is not visible, whereas the sell side is fully visible."