Page last updated at 11:56 GMT, Friday, 10 October 2008 12:56 UK

India's Sensex ends down again

Rising inflation erodes the value of the Indian currency and investments

Indian stocks fell sharply by nearly 1,000 points to a three-year low in the opening session of trading on Friday, registering a drop of 9%.

The benchmark Sensex fell to 10,239 points in early trade before closing just above 10,500.

The crash also affected the rupee which fell to 49 against the US dollar.

Meanwhile, the Reserve Bank of India (RBI) has cut the cash reserve ratio for banks to 7.5% to help generate more cash in the banking system.

It could make more than $12bn of credit available in an effort to resolve the liquidity crunch.

Traders say the market is responding to the global markets and the cut in the cash reserve ratio will help reduce the impact of the global crisis.

The BBC's Prachi Pinglay in Mumbai says it has been one of the worst weeks in recent years for Indian investors. Indian shares have lost nearly 50% of their value this year.

"Right now fear factor is overwhelming the markets and in the short run it can play havoc," broking and investment consultant Dilip Bhat said.

Some Indian traders fear that many foreign institutional investors, faced with increased problems at home and an unwillingness to take on extra risks, will sell their emerging market holdings and leave the market.

According to official figures, foreign funds have sold shares worth $879m (445m) in the four days to Thursday, taking total outflow in 2008 to $4.8bn.

Some traders say the figures show that foreign investors are "queuing up to exit" the Indian market.

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