Our Bureau

Mumbai, Nov. 27

The domestic stock market buckled for the second consecutive day on Friday fearing the Dubai World debt crisis might lead to a repeat of last year's Lehman Brothers' episode that sent world markets crashing.

Analysts said it was a knee-jerk reaction, as indeed it turned out to be when the Sensex, which plummeted 591 points intra-day, recovered most of its losses to close at 16,632. It lost 223 points – still in the red but not significantly down. The Nifty lost 1.27 per cent to close at 4,941.75.

The “recovery” came when European markets opened positive, and also with Life Insurance Corparation stepping in with some aggressive buying, said brokers. The Commerce and Industry Minster, Mr Anand Sharma, also said that the debt woes of Dubai World are unlikely to impact the Indian economy.

“The magnitude of problem in Dubai – a city-state – is not comparable to the adverse impact of last year. Investors soon realised that in the larger scheme of things, $59 billion is not that big enough to distort the fundamentals here.

“India's dependence on Dubai for FDI or FII is also not that heavy,” said Mr G. Chokkalingam, Director and Head of Equity Research at Barclays Wealth.”

FIIs were net sellers for Rs 1,057 crore. Domestic institutions were net buyers for Rs 699 crore on both BSE and NSE, and retail investors bought for Rs 11 crore (net) on BSE.

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