The BSE benchmark Sensex on Friday dipped below the crucial 19,000 level for the first time in four months on heavy sell-off by funds on concerns that inflation will erode profit growth and prompt RBI to raise interest rates this month.
The Bombay Stock Exchange benchmark Sensex tumbled by 322.38 points to 18,860.44, a level last seen on September 9, 2010.
The gauge touched the day's high of 19,447.82 in volatile trade.
Similarly, the broad-based National Stock Exchange index Nifty plunged 97.35 points at 5,654.55 as rate-sensitive realty, banking and auto stocks suffered losses on concerns that the increasing inflation would force the central bank to hike interest rate.
A weak trend in the Asian region and lower opening in Europe further weighed heavy on the domestic front.
Inflation shot up to 8.43 per cent in December, from 7.48 per cent in the previous month, as prices of certain food and non-food items continued to show an upward trend.
With inflation showing no signs of moderation, it is widely expected that RBI will raise the key policy rates during its quarterly monetary policy review on January 25.
The realty index fell the most by 2.77 per cent to 2,524.31 followed by bankex which lost 2.62 per cent to 11,850.60.
The metal index fell by 2.44 per cent to 16,371.60 as profits of Steel Authority of India, the country's second- largest steel producer fell to its lowest level in more than 14 months on rising input costs leading to a 34 per cent slide in its quarterly net income.
The auto index fell by 2.31 per cent to 9,259.02 as scrips of Tata Motors, the biggest truckmaker, dropped for the first time in three days by losing Rs 57.05 to Rs 1,178.60.
The midcap index fell by 1.18 per cent to 7,223.78 and smallcap index by 1.04 per cent to 8,993.84.