Unnerving the investor community, annual inflation, based on the wholesale price index (WPI), moved up 3.79 per cent in the week ended January 5 as compared with 3.5 per cent in the week ended December 29, 2007.

“The impending slowdown in the Indian economy is adding to the bearishness,” said a fund manager. C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, has indicated that a deep recession in developed economies would have an adverse impact on the Indian economy. Global rating agency Moody’s has said that India’s economy should expand 8 per cent in 2008, slower than 8.8 per cent last year as tight monetary conditions dampen loan demand and creaky infrastructure hobbles growth. On top of this, the government is getting ready to increase fuel prices, which will push inflation further up.

Analysts are worried about the global financial sector. The current financial sector slump will continue through 2008 and into 2009, testing bank creditworthiness, said Standard & Poor’s ratings services. “The downturn is unsettling because it comes in the context of relatively strong global economic growth and historically low corporate default rates,” said Standard & Poor’s credit analyst Scott Bugie.

While Indian markets tanked, other Asian markets mostly recovered from early plunges. In Tokyo, the region’s biggest market, the benchmark Nikkei 225 stock index rose 0.6 per cent to 13,861.29, reversing an opening 3 per cent plunge in the wake of an overnight drop on Wall Street. Hong Kong’s benchmark index rose 0.4 per cent to 25,210.87 after plummeting as much as 3.7 per cent in morning trade.

... contd.