8216;Markets may witness sharp correction8217;

Domestic economic indicators look weak,inflation is high,corp results are disappointing.

A deepening European crisis sent jitters across the world leaving the Dow Jones Industrial Average down 3.2 per cent on Wednesday and most of the Asian markets down between 2 per cent to 5 per cent on Thursday.

While,Indian markets were insulated from much of this action on account of a holiday today,experts see a sharp fall in the markets going forward,driven by domestic weakness coupled with a worsening European crisis.

While the trigger for the fall on Wednesday and Thursday was the jump in Italian 10-year bond yield to over 7 per cent,the level at which Greece and Ireland exploded,experts say that the crisis is unfolding exactly on predictable lines. Concerns over the size of Italian debt being too large for a bailout has also raised questions about the very sustainability of the euro.

Indian markets have been hinging around global news flows for a while and market players say that the developments have even eclipsed bad corporate results. The domestic economic indicators look weak with rising deficits,inflation continuing to remain high,and disappointing corporate results. This is reflected in the yields on 10-year bonds that reign at 9 per cent. They all indicate that the December quarter will be worse and all global and domestic factors suggest that we may see a sharp fall in the market. While the markets may be volatile,the bias is clearly downwards, said Aseem Dhru,CEO,HDFC Securities.

A revival is something very distant in the global markets as there is complete lack of confidence in the markets. The Indian markets too are following the trend as we are not going to be immune to these, said CJ George,MD,Geojit BNP Paribas Financial Services.

I think there will be a lot of pain in the near term till the Eurozone stabilises. De-coupling does not work in the short-term when things get panicky. Indian markets will remain volatile and will be under pressure in the near term, said Gagan Randev,CEO,Religare Securities.

In 2008-09,while there were global concerns,the Indian economy and corporate performance were strong but that is no longer the case and it makes experts believe that the bounce back may not be the way it happened in 2009.

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Then there are also fears over the GDP growth rate of the country. We are an investment led economy and the spending is not happening either from government or the private sector. If the government does not get its act together,we will struggle for a 6 per cent GDP growth rate in the next fiscal, said Dhru.

European Central Banks purchase of Italian bonds have been dismissed as a temporary palliative. Taking more debt can not be a solution for existing debt, said a well known market expert who did not wish to be named.