FIIs brought down their holding by selling shares worth Rs 255 crore yesterday, August 4, 2011. This was according to the provisional data from the stock exchanges. Meanwhile domestic institutional investors had bought stocks. But considering that FIIs tend to set the trend in the stock market, their notions and understanding will definitely impact India.

Finance Minister Pranab Mukherjee on Friday said, “This is nothing domestic. It is substantially due to external factors."

The stock benchmark Sensex had crashed by over 700 points to slip below 17,000-point level for the first time since May last year. However, as the day progressed it made some recovery and the sensex closed 387 points lower.

“This is mainly because of the fact that some projection has been made about poor recovery of U.S. This has affected the market sentiment. Current volatility is temporary. Hope that there will be a recovery shortly," the minister said.

He also added, “Asian stocks are tumbling today in the light of sharp sell off in the world markets due to poor economic indicators in the U.S. and fears of sovereign debt default contagion in Euro Zone spreading to other European countries."

In US, consumer confidence is already affected due to raging battle betweem the two parties in Congress over the government's debt ceiling and by high unemployment rate. This will further feed fears that another recession is just around the corner. Wall Street closed after suffering one of the worst sell-off in history, and the worst since early 2009 when financial crisis took a big toll, while crude oil declined as much as 6 percent. One of the major index in US S&P 500, has declined 10.7 percent in the past 10 trading days.

The panic has been further aggrevated due to the fears that United States could be staring at another recession considering the series of poor economic figures in the past week. The fact that all other developed economic regions are also in some sort of trouble adds to the gloom. Europe's sovereign debt crisis is worsening by the day, now Italy is also under its cloud. and threatens the existence of the euro zone in its current form.

Following the panic in US equities, markets all over the world tanked.

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