The Hindu Business Line : Markets resilient to past attacks

Terror attacks are not new to Mumbai, nor to London or New York. As Mumbai and India grapple with yet another assault, it will do well to recall that stock markets have responded with grit and resilience to such attacks in the past, refusing to buckle or go under.

The most destructive of terror attacks on Mumbai was on March 12, 1993 when bombs were planted in multiple locations including the basement of the Bombay Stock Exchange building. The casualty list included many sub-brokers and investors and offices of many brokers were damaged by the blast. However, when trading resumed in stock markets a day after, there was no crash as many had feared. The Sensex closed 2 per cent higher instead.

The reaction of the Indian investors was similar in July 2006 when bombs were planted in Mumbai suburban trains, targeting the urban commuters. When stock markets opened for trading the next day, there was an initial downward blip after which the Sensex rose strongly and ended the day with gains.

Global phenomenon

The behavioural pattern of investors appears to be similar irrespective of geographical location. The bomb blast in London in July 2005, also known as 7/7 bombing, that hit the London public transport system, elicited an identical response. The UK benchmark, FTSE 100, crashed to 5022 as the news of the blasts reached the markets. But there was a stunning intra-day recovery thereafter as investors fought back and the index recouped all the losses in just two trading sessions.

And how can a story on terror attacks be complete without the World Trade Center bombing? The destruction of the World Trade Center and attacks on other locations in US by al-Qaeda on September 11, 2001, was on a scale that shook equity markets across the globe. Trading in US financial markets was suspended for about a week. There was the inevitable crash when the markets opened for trading. But surprisingly, the cut went no deeper than 16 per cent and what is more, the Dow Jones Industrial Average took just 10 days to bottom out after the event and reverse higher.

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