Markets singe in Dubai crisis, end down despite smart recovery

Dubai's debt crisis has put Indian equities as well as global markets on fire since yesterday. The crack across the globe emerged when Emirate said two of its flagship firms Dubai World & Nakheel planned to delay repayment of billions of dollars in debt. The markets feared that this debt default could affect other countries as they are trying to recover from global meltdown.

But the benchmark indices as well as European shares discounted most of the news, due to which Indian equities recovered more than 2/3rd of their losses in the last couple of hours, led by buying from insurance companies. The Nifty closed the day above 4,900 level while the Sensex above the 16,600 level.

All markets across the globe started sinking yesterday when Dubai's government said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, and Nakheel, builder of its palm-shaped islands, to agree a standstill on billions of dollars of debt as a first step towards restructuring. Dubai World has USD 59 billion of liabilities, representing a large part of Dubai's total debt of USD 80 billion.

Asian markets did not react too badly yesterday to the Dubai's debt crisis news, which came in the Wednesday's afternoon. These markets crashed today. Hang Seng plunged 4.8% and Kospi was down 4.7%. Nikkei and Taiwan Weighted fell 3.2% each. Shanghai and Jakarta were down 2.4-2.8%. European markets were flat at the time of writing this repor, as they had reacted to the news on Thursday with fall of over 3%. US futures were down over 2%, as US markets closed on Thursday on thanksgiving note.

The 30-share BSE Sensex recovered 421.57 points, before closing at 16,632.01, down 222.92 points or 1.32%. The 50-share NSE Nifty fell 63.80 points or 1.27%, to settle at 4,941.75, after seeing recovery of 135.05 points from day's low.

This fall of over 200 points was on account of sell-off in banking, capital goods, technology, auto, FMCG and oil & gas exploration companies' shares. However, buying in Bharti, Ranbxy, Suzlon, Unitech, BPCL, Cipla, Reliance Infrastructure, Hero Honda and Tata Steel helped the markets in recovery to some extent.