History shows equities surge after Mumbai terror strikes: analysts

By Arjun Sen, IANS,

New Delhi : No one is betting on it because the current global financial tsunami has made investors jittery, but if history is any indication, Indian investors have always fought back and pushed up markets every time terror has struck Mumbai, India’s financial capital, analysts said Thursday.

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Indian equities markets were kept closed Thursday, the morning after the terror attack, and analysts said the move would prevent any knee-jerk reaction, even as history shows markets have surged every time there has been a terror attack in Mumbai.

“Of course, this only adds to the prevailing negative sentiments but it is to the credit of Indian investors that every terror attack in the past has only improved sentiments and markets are all about sentiments,” Jagannadham Thunuguntla, director of India’s fourth largest share brokerage house, the Delhi-based SMC Group, told IANS Thursday.

“In the March 12, 1993 serial blasts, the Bombay Stock Exchange (BSE) itself was attacked but markets were closed only temporarily and ended higher than the previous day and even higher the next day,” Thunuguntla said.

The BSE’s benchmark 30-share sensitive index (Sensex) March 11, 1993, closed at 2,330 points. On the day of the blast, March 12, a Friday, the Sensex closed at 2,361, up 31 points or up 1.33 percent.

In the next trading session Monday, the Sensex closed at 2,421, up 60 points or 2.54 percent from its close Friday previous week.

The equities markets reacted similarly after the next major terror attack – the serial blasts in Mumbai suburban trains July 11, 2006. The blast took place after markets had closed with the Sensex finishing that day at 10,614 points.

The next day, July 12, the Sensex closed at 10,930 points, a gain of 316 points or 2.3 percent.

“If markets had been open Thursday, there could have been a knee-jerk reaction as investors are already grappling with too many shocks, but Friday that will not happen,” Naresh Pachisia, managing director of eastern India’s largest financial services firm SKP Securities Ltd told IANS.

“Of course, a negative reaction is possible with hotels, where important corporate and financial personalities stay, being attacked. But these things are usually one-day affairs,” Pachisia said, adding: “India is a huge and resilient country and these things are part and parcel of life… life will go on.”

“These attacks will certainly impact foreign pension and retirement funds such as Calpers as they want stable returns and low risk and now returns in India are low while risks have increased,” Thunuguntla said.

Calpers or California Public Employees’ Retirement System is one of the world’s largest pension and retirement funds and provides retirement, health, and related financial programmes and benefits to more than 1.6 million employed people, retirees and their families, and more than 2,500 employers.

It has a current market value of $178.8 billion despite the market meltdown. The fund had entered India in 2007 with reportedly 1 percent of funds under management earmarked for investment in India.

“Similarly, many retail investors may think that now there is no certainty for their money nor for their lives,” Thunuguntla said.

“But hedge funds like to play with risk so they may continue if they find returns in India are again improving,” Thunuguntla said, adding: “In any case terror events pan out in a day or two so that markets will continue to behave according to overall global and domestic economic and financial situation.”