Indian, European stocks recover; Jet Air turns PAT positive

European and Indian shares shares staged a slight recovery on Friday from a selloff provoked by the European Central Bank's failure to satisfy investors' hopes of swift action to tackle the debt crisis.

The ECB kept rates unchanged and dashed hopes of any immediate action to ease the borrowing costs of Spain and Italy by indicating it may resume buying bonds but only under conditions that would delay any move until at least September.

The Sensex was down 88.84 points or 0.52% at 17135.52, and the Nifty lost 29.50 points or 0.56% at 5198.25. About 1130 shares advanced, 1497 shares declined, and 812 shares remain unchanged.

The euro was under pressure but traded around $1.22, up 0.15 percent, having fallen nearly three cents to $1.2133 on disappointment over the ECB's decision.

The services sectors in emerging powerhouses China and India grew in July at a healthy pace, providing vital support for the two economies as their manufacturing sectors struggle with the global downturn.

China's official purchasing managers' index (PMI) for the services sector fell to 55.6 in July from 56.7 in June, while a similar private-sector survey sponsored by HSBC headed in the opposite direction, rising to 53.1 from a 10-month low in June of 52.3.

India's non-manufacturing PMI from HSBC was little changed, slipping to 54.2 in July from 54.3 in June.

Shares in state-run banks fall on concerns a looming drought would increase defaults of farm loans, leading to higher provisioning in coming quarters.

Top-ranked State Bank of India falls 1%, while Oriental Bank of Commerce drops 2.2% and Allahabad Bank retreats 1.5%.

"If government declares drought in most of the states, then there will be rescheduling of repayment of crop loans, which accounts for a significant portion of total agri portfolio of the state-run banks," Manish Ostwal, sector analyst at KR Choksey said.

Tractor maker Mahindra & Mahindra shares fall 1.7% as the growing likelihood of a drought in India threatens to hit rural sales.

Mahindra & Mahindra already saw tractor sales fall 2.4% from the previous month and 4.5% on a year-to-year basis.

After five straight quarterly losses, Jet Airways has reported a net profit of Rs 24.70 crore for the April-June period on improved yields and cost cutting measures. The country's largest private airline said if not for a  forex loss of Rs 69 crore, it would have posted better results.