Indian stock exchange resilient

December 7, 2008
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, MUMBAI, December 7 – It was business as usual for Mumbai\’s stock exchange last week, as the city\’s investors shrugged off the terror attacks that brought India\’s commercial capital to a halt.

In the week after Islamist extremists launched an audacious assault on the city\’s wealthiest area, the Mumbai Stock Exchange ended up almost one percent.

That resilience was evident even as the 60-hour seige was still underway, with the exchanges opening for trade on Friday, November 28 before the militants had been overpowered.

The coordinated attacks began on Wednesday, November 26, and the drama did not end until early on Saturday.

"It is business as usual amid huge security," Bhaskar Kapadia, a partner with brokerage Pyramid Securities, said.

The only visible fallout, he said, was "additional frisking, sniffer dogs and additional police at the sole (operative) entrance".

Ten gunmen who have been linked to Pakistani extremist group Lashkar-e-Taiba brought the city to a standstill when they took hostages in two luxury hotels and a Jewish prayer centre.

The official death toll is 172, including nine of the gunmen and 26 foreigners.

There were fears that the attacks would damage everything from foreign investment to tourism but Asia\’s oldest stock exchange, nestled down narrow Dalal Street in Mumbai\’s bustling southern commercial district, had no intention of being cowed, brokers and fund managers told AFP.

The markets had a lacklustre opening on the Friday as the attackers continued to hold India\’s security forces at bay.

But they gained momentum as last week wore on, with financiers looking ahead on hopes that India\’s central bank would cut rates.

For the week, India\’s benchmark 30-share Sensex gained 0.85 percent or 76.02 points to close Friday on 8,965.2, from an opening level of 8,889.18 on November 28.

India\’s central bank on Saturday slashed its two key short-term interest rates by a full percentage point as part of a larger stimulus package.

The Reserve Bank of India reduced its repo rate — the rate at which it lends to commercial banks — to 6.5 percent and its reverse repo rate — the rate at which it borrows overnight — to 5.0 percent.

"The terror attacks were tragic but I am sure we should be able to return back to normal soon," central bank governor Duvvuri Subbarao said.

Traders said they expected a bounce when the markets reopen Monday, though hospitality and aviation stocks are expected to suffer in coming months as a result of the attacks.

Edelweiss Securities issued a report noting Mumbai\’s "remarkable resilience in the past", saying: "We do not expect this time to be any different."

As India\’s commercial and financial centre, Mumbai is home to the central bank and the main stocks and commodity exchanges. The country\’s biggest corporations are based here, along with the Indian headquarters of several international banks.

"Sentiment has improved marginally," said Harendra Kumar, head of research at Centrum Broking. "We did not see the markets hit (recent lows) despite the terror attacks and news of a recession in the US."

The Sensex hit a three-year low of 7,697.39 on October 27, as concerns grew about the deepening global financial crisis.

Fund managers say attention has now shifted back simply to making things work.

"India\’s recovery through the global financial turmoil is the real concern," said Sandeep Shenoy, strategist with financial services PINC Research.

Life appears to have returned to normal in Dalal Street, where vendors outside the exchange peddle snacks to brokers and anxious investors watch their fortunes fluctuate on the large BSE Broadcast trading screen above the back entrance.

Ironically, the city\’s landmark hotels where the attacks were centred — the Taj Mahal and the Trident/Oberoi — had long been favourite watering holes for the city\’s top brokers and investment bankers.

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