Indian bourses on Friday mirrored the fall in the global markets which were gripped by fears of a double dip recession in US and a liquidity crunch in the Euro Zone.

The Sensex nosedived 700 points while the Nifty fell by as much as 205 points in intraday trade.

The NSE lost 120.55 points or 2.26 per cent to close the day at 5211.25 points while the BSE lost 2.19 per cent or 387.31 points to close at 17305.87 points.

“There have only been 10 times in the history of the US markets when the Dow has fallen by 500 points in a single day. So we knew this time around as well that our markets would react sharply and decline,” said Mr Jagannadham Thunuguntla, Strategist & Head-Research SMC Global.

All indices on the BSE and NSE fell sharply and the only saving grace was the V shaped intraday recovery for the Sensex and the Nifty at close as the final erosion was nearly equal to the gap down opening in the morning.

“People are reacting by either not buying or booking profits. Some are even booking losses as they feel something is better than nothing,” said Dr Nirakar Pradhan, CIO – Future Generali Life Insurance.

FIIs sold equities for a net of Rs 17,88.96 crore on Friday. It was DII buying which started the recovery in afternoon trade; they bought equity for a net of Rs 1,372.49 crore.

“This is but a minor hiccup. It is more of a sentimental impact as FIIs are withdrawing money. Ours is a global investor-dominant market,” said Mr Motilal Oswal, Chairman and Managing Director, Motilal Oswal Financial Services.

Retail investors turned buyers; on the BSE they bought net equity worth Rs 146.1 crore.

“Global cues indicate that all is not well in Europe and the US,” said Mr Ashish Choudhury, a retail investor. “This was bound to impact our markets as well and I did not transact today.”

The entire trading session on Friday was so volatile that the volatility indicator India VIX rose 23.15 per cent to close at 24.90 points.

The Nifty had an advance-decline ratio of 6:44 with BPCL, Hindalco, ONGC, Cipla, IDFC and Jindal Steel the only gainers while the Sensex had an advance-decline ratio of 3:27, with only Hindalco, ONGC, Cipla closing Friday on a positive note.

“The markets would consolidate with a negative bias,” said Mr Nirmal Jain Chairman IIFL.

“Though the event-related negative sentiment would remain for some time, a fall in the crude oil and commodity prices would bring down India's deficit worries for now and RBI would not have to hike rates as a result.”

Government securities saw a 50 per cent rise in volumes, from Rs 12,000 crore to Rs 18,000 crore on Friday. This indicates redeployment of funds into safer asset classes, said market-men.

Brent crude oil softened to $107 a barrel, while Nymex futures were trading in the range of $90-$95 a barrel.

Gold at all-time high

Domestic gold prices hit an all time high of Rs 24,500 per 10 grams, while the rupee depreciated 20 paise to a dollar to close at 44.75.

Chartists said that the 5100 level is an important support level for the Nifty.

“The Nifty is expected to bottom out by next week and would consolidate between 5100 and 5400 in the coming 2-3 weeks and could touch the 5600-5700 levels by next month,” said Mr Sushil Mulye, Head-Technical research Gupta Equities.

Others advise investors to be cautious before transacting.

“The markets will continue to remain choppy driven by overseas cues and investors should be cautious before making buying or selling decisions,” said Mr Arun Kejriwal, Founder KRIS Research.

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