Mumbai: India’s stock markets rose Friday, shrugging off a prolonged terrorist attack that continued to rage not too far from the Bombay Stock Exchange (BSE), Asia’s oldest stock exchange.
BSE’s bellwether Sensex index rose 66 points, or 0.73%, to 9,092. The broader 50-stock Nifty index of the National Stock Exchange, or NSE, remained largely flat at 2,755.
Undeterred: A television screen on the BSE building shows telecast from the Taj Mahal hotel in Mumbai, which was attacked by terrorists. Bhuma Srivastava / Mint
The rupee, however, ended at 50.09/50.12 to a dollar, weaker from the previous close of 49.48/49.50, on increasing dollar demand from foreign banks and month-end demand from importers.
The markets were shut on Thursday, the first morning of the terror attacks, which showed little sign of abating as terrorists and security forces continued to play a cat-and-mouse game of shoot-outs, explosions and sporadic fires that seemed to rage unchecked.
“These attacks are not going to impact corporate earnings or growth,” insisted Raamdeo Agarwal, joint managing director of Motilal Oswal Securities Ltd.
An upbeat mood in other Asian markets, increasing expectations of monetary easing in India helped Sensex gain.
Some investors were also betting on an interest rate cut, “following the Mumbai terrorist attacks, as the government tries to shore up the market sentiment”, wrote brokerage firm India Infoline Ltd in a Friday note to clients.
NSE’s futures and options segment’s trading volume was broadly in line with the prevailing trend. The investors traded Rs48,888.96 crore on Friday, compared with Rs47,624 crore average daily turnover this fiscal year. In the cash markets, however, volumes were poor: Rs 8,818 crore against the year’s average of Rs12,240 crore.
NSE managing director Ravi Narain told a television news broadcaster he was “pleasantly surprised” at the volume of trading and this showed the resilience of the system.
Analysts and fund managers said while the attacks might put off people from investing for the short-term, they are unlikely to have a longer-term impact.
“We do not see any long-term impact of the terrorist attacks on the economy or the capital markets, though some weakness is likely in the near term,” wrote brokerage Edelweiss Capital Ltd. “We expect both, tighter anti-terrorist laws and more stringent security measures to come out of this; this should again be positive in the medium- to long-term.”
Rating agency Standard and Poor’s credit analyst Takahira Ogawa said the attacks will not affect India’s ratings.
“Based on the scenario that these attacks were an isolated case, we don’t expect there would be negative implications on India’s macroeconomic activities, or on the government’s fiscal position,” Ogawa said.
Moody’s Investors Service too echoed a similar sentiment but said it would look at the actions of the government in controlling the situation as well as restoring confidence.
Despite a credit crunch, India’s economic output is expected to grow by at least 6% in the next two fiscal years, as inflation eases and more people enter the workforce.
“India’s year-on-year GDP growth remained surprisingly solid in the September quarter, decelerating only mildly from 7.9% to 7.6%,” wrote Sherman Chan, an economist with Moody’s Economy.com in a Friday report.
“We expect inflation to ease substantially from 9.2% year-on-year in FY09 to 2.6% in FY10,” said Sonal Varma, India economist for Japanese investment bank Nomura Holdings Inc. in her Friday report.
Brokerages, however, expect adverse impact on sectors, such as hospitality and aviation, on account of a likely slowdown in tourist arrivals, particularly business travellers.
In this category, the stock that was most affected was Indian Hotels Co. Ltd, which owns the Taj Mahal hotel that was the epicentre of the attacks. The stock dropped 17.03% to Rs40.20 a share.
Among the airline stocks, Jet Airways (India) Ltd was hit the most, falling 6.13% to close at Rs129.45.
Earlier in the day, Hong Kong’s Hang Seng index rose 2.5% while Japan’s Nikkei 225 index climbed 1.7%. The only major Asian market to decline was mainland China, where the Shanghai Composite index fell 2.4%.
But as Asian markets closed, European stock markets fell modestly Friday on some profit-taking. Meanwhile, traders in New York will be closely watching indications of retail sales on Friday across the US. The day after the Thanksgiving holiday is traditionally one of the biggest shopping days of the year. With the US economic slump, the upcoming Christmas sales period is not expected to be particularly good for retailers.
Pan Pylas of Associated Press contributed to this story.