Indian markets pared losses after the second quarter gross domestic product data came in-line with expectations. At 1155 hours, the Sensex was down 36 points while the broader Nifty index was trading 16 points lower.
Second quarter GDP stood at 6.9 per cent, the slowest pace of economic growth in the last nine quarters. Analysts said the number was already priced in. "It is lower than one expected but not very much lower...The number is still consistent with overall growth rate of over 7.5 per cent for the year," C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council said. He added that the second quarter number might be revised upwards.
Consumer durables were the worst performing group of stocks while Capital goods stocks declined over 1 per cent, reflecting the poor growth number. High beta stocks - metals and realty - were also trading with deep cuts.
On the Sensex, 12 stocks were trading higher. Defensive stocks extended gains. HUL and Sun Pharma advanced over 1 per cent. Sterlite and BHEL were the big underperformers on the Sensex, falling over 2 per cent.
The market breadth weakened despite some pullback in the benchmark indices. Nearly 73 per cent stocks were down on the broader BSE 500 index.
Indian stocks recovered even as Asian markets weakened further. Markets in China plunged over 3.5 per cent while Hong Kong's benchmark, Hang Seng, was down 2 per cent. Global sentiments turned negative after a meeting of European finance ministers ended without an announcement on plans to contain the debt crisis. Bond rates in Italy rose sharply as compared to last month, further deterioration sentiments.
"Investors and policy makers are becoming frustrated with the lack of progress in resolving the euro crisis, which has been going on for over 2 years now. There is policy frustration in EU, there is policy frustration in OECD which has forecasted a recessionary growth in Europe and action needs to be taken," Robert Parker of Credit Suisse said.
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