The rout in the Indian stock market this week has not only shaved off about 1000 points from the Sensex, it has also made the Indian benchmark the second worst-performing index over the last one month.

No points for guessing that crude oil is the miscreant in the story.

With international crude oil prices hovering close to $130, countries across the world are beginning to feel the heat on the inflation front, despite the heavy subsidies that many of the countries are forking out to temper the impact of rising fuel bills on the population.

The slide in the Indian stock market on Wednesday was triggered by the hike in petrol, diesel and liquefied petroleum gas price by the Government.

The political unrest caused by the move and the impact of the fuel price hike on inflation that has already crossed 8 per cent was the theme playing in the stock markets during the sell-off.

Other markets that experienced a sharp slide over the past month are also grappling with the same issues as India. The inflation in Vietnam, whose stocks were the worst performers over the past 30 days, is at a whopping 25 per cent.

Pakistan, the other stock market that is at the bottom of the league, has a core price inflation rate at 17 per cent! Countries with lower commodity reserves and current account deficits such as India and Vietnam appear to be facing the brunt of selling pressure.

Interestingly, these two countries (India and Vietnam) were among the best performing markets in 2007. With the risk aversion among global investors and liquidity contraction following the losses made as a result of the sub-prime issue, FIIs are pulling funds out of the markets where they are holding profitable positions.

While India has witnessed net FII outflows of $4.2 billion so far, these investors have pulled out $743 million from Vietnam.

The best-performing markets in the past month are from commodity rich countries such as Russia, South Africa and the Latin American nations. Brazilian and Russian stock markets are among the select few that have surpassed their 2007 peak.