Indian Stock Market Remain Sluggish

As expected, the Indian markets remained sluggish last week as it declined 4 percent led by the crisis in the euro-zone and signs of slowdown in the domestic economy. The Sensex and Nifty closed at 16,213 and 4,867 declining 633 and 183 points respectively.

The week started off flat due to profit bookings at higher levels. Political pressures that forced the government to roll back its proposal to allow 51% FDI in multi-brand retail too weighed on investors’ sentiments. The markets later slipped into the red on reports that the industrial output had declined by 7% in October 2011. Also, the warning by French leader that the risk of euro-zone explosion is very real and S&P putting a number of large European banks and European Union on watch for a downgrade of its AAA credit rating weighed on the market outlook.

The domestic market continued its downtrend after the government conceded that the Indian economy had hit a rough patch. The Finance Minister announced that the GDP expansion in 2011-12 could be lower at around 7.5% as the sharply deteriorating global economic environment had a dampening effect on India. The markets slipped further after the European Union leaders failed to agree on the much awaited treaty that would toughen fiscal rules and impose automatic sanctions on countries violating budget limits.