MUMBAI: Indian shares fell as investors’ hopes of a global economic recovery are fading fast, with a possible Chinese hard-landing aggravating the problems for policymakers already grappling with a crisis in Europe.

Key Indian stock indices rallied nearly 2% from the day’s lows on better-than-expected earnings from engineering company Larsen & Toubro, but that was not enough to overcome the fears about worsening of crisis in Europe.

China’s aggressive posturing on slowing its real estate market and lending could lead to a sharp fall in growth rates, dashing hopes of the country being the engine to pull the world out of the slump.

“The problems in Europe will keep the market volatile in the short term,” said Vikram Kotak, chief investment officer, Birla Sun Life Insurance. “But we are positive on the macro situation, as falling oil prices and better-than-expected inflows from the 3G auction should help contain fiscal deficit.”