German tremurs- will it stop Indias growth story

World markets were on a crash course today, while the euro hovered near four-year lows against the dollar after Germany banned speculators from short-selling government bonds, fanning concern the global economic recovery may be derailed.

Indian markets also felt the heat. In its second biggest fall so far this year, the benchmark equity index, Sensex, of the Bombay Stock Exchange crashed 467 points, or 2.77 per cent. The index was near its three-month low. Six of the 30 stocks on the index plunged by more than 5 per cent, pushing the measure below its 200-day moving average for the first time in morethan a year. Some investors may read the breach as a signal of further declines
The rupee depreciated to its weakest per dollar since February 2009 on speculation overseas investors would pare holdings of emerging market stocks.
Crude oil slumped to a seven-month low in New York as the dollar climbed against the euro, curbing the investment appeal of commodities. Copper for three month delivery fell 2.8 per cent on the London Metal Exchange, while gold fell to $1,200 an ounce on profit booking.

The ban also brought back memories of an unsuccessful attempt by the US and British authorities to prop up stock markets at the end of 2008, in the wake of the collapse of Lehman Brothers and the ensuing crisis that gripped the banking sector.

According to me “The Indian markets would see fluctuation and volatility,”. “But, directionally, I don’t see investors withdrawing from India. I think from the Asian perspective, the implications are going to be more muted to the European crises because the local markethere are still flush with liquidity across most countries,”
India on a relative basis is not as affected, but in an absolute sense, it cannot be said that there will be no impact since the country is co-related with the rest of the world. The crisis will bring back fears of the economy slowing down, will bring risk back into the equation and the credit market will start getting some fears. In terms of FII flows, though there may be some impact in the short term, with more and more FIIs looking to invest in emerging markets, in the long-term the theme will get reinforced,