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. Last Updated: 07/27/2016

Indian Stocks Drop 8% on Political Crisis

BOMBAY, India -- A political crisis ripped through Indian stocks Monday, tearing more than 8 percent off Bombay's benchmark index as investors watched the government struggle to face a challenge from a former ally, analysts said.

"It's certainly an unpalatable turn of events," said Bharat Iyer, strategist at UBS Securities. "It's very confusing."

Share prices went into a tailspin on Sunday's news that the Congress party had withdrawn its make-or-break support to Prime Minister H.D. Deve Gowda's 10-month-old government.

Bombay's benchmark stocks index plunged 299.63 points, or 8.2 percent, to 3363.90 -- its fourth largest fall ever. Stocks in Delhi and Calcutta fell more than 6 percent.

On the Bombay-based National Stock Exchange, the index dived 89.55 points, or 8.5 percent, to a provisional close of 968.25.

"Every time a politician says something in the coming weeks, the market will move sharply," Iyer said. "It's going to be a traders nightmare."

Analysts said they were advising institutional investors to keep a low profile until the political picture cleared.

"We're telling investors to wait-and-watch rather than sell right into the panic," said Bidisha Ganguly, economist at W.I. Carr Securities.

"We believe that in the short term investors shouldn't sell into the vacuum. They should look for a buying opportunity at around 3,100 points," said Robert Jackson, chief dealer at Jardine Fleming India Broking.