The Hindu Business Line : Indian resilience poses stark contrast to overseas counterparts

While Infosys' results are said to have contributed to the BSE and NSE shrugging off Tuesday's serial bomb blasts in Mumbai and grenade attacks in Kashmir to close higher on Wednesday, the trend is in line with the resilience shown immediately after such terror attacks at home in the past.

In 1993 and again in 2003, when Mumbai witnessed a series of bomb explosions, the stock markets showed stubborn resilience in the ensuing trading sessions with the Sensex closing higher the next day on both occasions.

Panic reaction

In sharp contrast is the immediate panic reaction of European and the US bourses to terrorist attacks in their respective countries. For instance, in response to the July 7 London tube bombings last year, all major European stock markets took a nosedive as an immediate reaction. The London market fell sharply the day after bomb blasts hit the city's transport system, with the FTSE 100 plunging 71.3 points at close of trading day on July 8.

In Frankfurt, German shares sank on the news, with the benchmark DAX index down 85.31 points, while in Paris, the benchmark CAC index lost 59.33 points.

Madrid bombings

Prior to that, the March 11, 2004, Madrid train bombings also saw European markets reacting immediately, with the FTSE 100 losing well over 100 points, and markets tanking in Paris, Amsterdam, Frankfurt and Milan. The Indonesian stock market, as an immediate reaction to the Bali bombings of October 2002, fell 5 per cent.

9/11 attacks

As for the US, the NYSE, the American Stock Exchange and Nasdaq remained closed after the September 11, 2001, terror attacks.

When they reopened on September 17, the Dow Jones Industrial Average index fell 684 points, or 7.1 per cent — its biggest-ever one-day point decline.

According to a Davis Research study of 23 such events from Pearl Harbour in 1941 to the al-Qaeda bombings in Kenya in 1998, an average 7.1 per cent fall in the Dow Jones Industrial Average has been seen during the first few days of the crisis.

Though no such study exists for the UK stock market, London takes its cue from the US, particularly in factors affecting sentiment.

Interestingly, Indian markets, despite their resilience to terror attacks at home, have not taken too well to terrorist incidents abroad.

The stock markets here, for instance, took a tumble during intra-day trade when news of the series of blasts in London underground trains trickled in, with panic selling leading to a near 2 per cent loss in the benchmark indices.

The 9/11 attacks triggered a downward spiral in case of the Sensex, which went on to record a 10-year low of around 2,600 points.

More Stories on : Terrorism | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page