This is becoming too difficult to trace the cause of the problem. If anybody has come across such a problem and solved it, requesting them to share the solution. I needed to install the SPS as a single server deployment. While I tried to install the SPS the system first installed the SPS and started automatically uninstalling SPS from my machine. The Event viewer showed me that the account (Even though it was an administrator in the machine) which I was using to install SPS had not been included in “log on as a service” settings. I enabled that and the installation was successful.

As a next step I tried to create a portal site under default web site. But it was failing. In the Event log I could found the following messages

“An exception occurred while creating a Search indexer application”

“Site CollabPortal failed to connect to component settings database <more information is available in the diagnostics logs on the configuration diagnostics settings pages in SPS creation log”