The Bombay Stock Exchange (BSE) Sensex fell 4.44 percent on Monday, the last day of the financial quarter, to end the quarter of March down 22.9 percent, its biggest quarterly fall since the June 1992 quarter, as reports of rising inflation and global economic slowdown dampened market sentiments.

Despite the record quarterly fall in March, the Sensex ended the 2007-08 fiscal year up 19.7 percent due to a strong rally towards the latter half of 2007.

The 30-share benchmark index closed 726.85 points down at 15,644.44, with 26 components ending in the negative zone. The March quarterly fall of 22.9 percent is its biggest since a 28.1 percent drop in the June 1992 quarter.

Financial stocks led the Sensex slide as leading mortgage lender Housing Development Finance Corporation (HDFC) plunged 8.79 percent to Rs.2383.75, followed by India's No.2 bank, ICICI Bank, which slipped by 7.79 percent to Rs.770.10.

Smaller rival HDFC Bank fell 5.79 percent to Rs.1319.95 while market leader State Bank of India (SBI) ended 4.81 percent down at Rs.1598.85.

IT stocks too had a bad day with market leader Tata Consultancy Services (TCS) ending down 6.80 percent at Rs.810.90. Wipro, Infosys Technologies and Satyam Computer Services followed closely behind, slipping 6.32 percent, 6.30 percent and 3.40 percent to Rs.425.30, Rs.1430.15 and Rs.394.55 respectively.

According to market analysts, IT stocks fell on worries about the health of the US economy. Indian IT firms depend on the US clients for a major share of their revenues.

Sensex heavyweight Reliance Industries (RIL) and engineering and construction major Larsen & Toubro (L&T) fell 3.54 percent and 3.89 percent to Rs.2264.50 and Rs.3024.80 respectively. The two stocks contribute to almost a quarter of the weight of the main index.

Power majors NTPC and Reliance Energy slipped 3.55 percent and 6.19 percent to Rs.197 and Rs.1251.15 respectively.

Other major losers were DLF (down 7.07 percent), ONGC (down 6.68 percent), Hindalco (down 6.10 percent), Jaiprakash Associates (down 5.74 percent), Hindustan Unilever (HUL) (down 5.57 percent), Reliance Communications (down 5.24 percent), Grasim Industries (down 4.82 percent) and Tata Motors (down 3.48 percent).

The Sensex gainers of the day were Cipla (up 1.01 percent), Mahindra & Mahindra (up 0.66 percent), Bharti Airtel (up 0.05 percent) and ITC (up 0.02 percent).

All the BSE sectoral indices ended in the red, the slide being led by Bankex (down 5.89 percent), IT (down 5.60 percent), Realty (down 5.39 percent), Oil & Gas (down 4.31 percent) and Metal (down 4.31 percent).

TECk, PSU, Consumer Durables, Power and Consumer Goods fell over 3 percent each.

FMCG, Auto and Healthcare slipped in the region of 0.18-1.23 percent.

The BSE Midcap and Smallcap indices fell 1.46 percent and 0.76 percent to 6427.82 and 7841.62 respectively.

Despite the dismal performance of the Sensex, the BSE market breadth was slightly positive with 1365 shares advancing, 1291 shares declining and 43 shares remaining unchanged.

The broader 50-share S&P CNX Nifty index of the National Stock Exchange (NSE) slipped 4.2 percent or 207.50 points to 4,734.50.

Market analysts have mainly attributed Monday's fall to reports that the Institute of Chartered Accountants of India has instructed companies to disclose and/or provide for all losses on derivative contracts from the current financial year, which led to the fears that fourth quarter earnings of companies may decline.

Inflation is the biggest problem right now, and with the economy slowing down there will be a pressure on margins of corporates that will lead to an earnings downgrades, said Nikunj Doshi, investment manager at Envision Capital.

I think the government is more interested in controlling inflation and would prefer it over arresting a slowing growth, he said.

According to government data, annual inflation was at 6.68 percent in the 12 months to March 15, higher than the previous week's 5.92 percent. It was the highest reading since January last year when it hit a two-year high of 6.69 percent.

Elsewhere in the region, Karachi's 100-Share index fell 0.93 percent to 15,125.89 points and Colombo's All-Share index lost 0.56 percent to 2,550.47.

The Asian markets had a mixed day with majority indices ending in the red, tracking weakness in American stocks after retail chain JC Penney warned of slow consumer spending amid lingering worries about credit crisis.

Barring South Korea's Kospi, which gained 0.13 percent or 2.16 points to 1703.99, Japan's Nikkei ended 2.30 percent or 294.93 points down at 12,525.54; Hong Kong's Hang Seng slipped 1.88 percent or 436.75 points to 22,849.20; China's Shanghai Composite plunged 3 percent or 107.43 points to 3472.71; Taiwan's Taiex slipped 0.59 percent or 50.89 points to 8572.59; Malaysia's Kuala Lumpur Composite closed down 0.87 percent or 10.89 points to 1247.52; and, Singapore's Strait Times dropped 0.81 percent or 24.54 points to 3007.36.