Sensex sheds 1340 pts in 5 days; cap goods, banks drag

Equity benchmarks saw a free-fall on Monday and kicked off the second week of 2011 on a bearish note, dragged down by sectors like capital goods, oil & gas, financial, metal and realty. The Nifty extended losses for fifth consecutive session and touched one-month low during the day; shed 395 points while the Sensex dropped 1340 points in five days.

Likely contraction in companies' margins due to rise in commodities' prices, soaring inflation and likely rate hike by RBI to contain inflation were the main reasons behind this sell-off, say experts. The sell-off by foreign investors and further shorts build up dragged the markets down on Monday. Rajat Rajgharia of Motilal Oswal Securities expects the markets to go down from current levels. Ajay Srivastava, CEO of Dimensions Consulting too says markets could correct 8-10% from current levels.