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India's Sensex makes sharp recovery after opening plunge

New Delhi - Indian stock markets plunged sharply by over 7 per cent on Wednesday tailing global cues, but recouped to close just 2.5 to 3 per cent down following assurances on the country's strong economic fundamentals by top officials.

The 30-share Sensex of the Bombay Stock Exchange, after touching its lowest point in two years, closed at 1138.26 points, about 3.14 per cent down.

The broader 50-share Nifty closed at 3513.65 points, about 2.58 per cent below Tuesday's close. The Nifty also touched its lowest point since August 2006 earlier in the day.

Analysts said Indian markets were reflecting the global meltdown brought on by the US credit crisis and withdrawal of funds by foreign institutional investors.

The rupee dipped to a six-year low of about 48.28 against the US dollar raising fears of more capital outflows.

Top Indian officials including Finance Minister P Chidambaram, Commerce Minister Kamal Nath and Planning Commission Chairman Montek Singh Ahluwalia made statements highlighting India's strong economic fundamentals and said investors had no reason to panic.

‘In August, FDI (foreign direct investment) growth was 124 per cent and 219 per cent in July this fiscal, which is an indicator to the fact that India with its strong fundamentals can tide over global financial crisis,’ Nath said.

Chidambaram said liquidity would be provided if the need arose, adding that India was not affected by the US crisis to the extent of some other countries. ‘All of India must feel confident of our growing economy,’ he said adding that investors should not take hasty decisions.