Stock markets refuse to buckle before terror attacks

Lokeshwarri S K BL Research Bureau | Updated on January 22, 2018


If the intent of a terror attack is to cause panic, it does not work with stock markets. Investors have displayed indomitable spirit with stock prices mostly rallying back strongly in succeeding sessions.

This is likely to play out on Monday, when markets open after Friday night’s dastardly attacks in Paris.

The July 2005 bomb blasts in London’s public transport system, elicited a similar response from investors. The UK benchmark, FTSE 100, crashed to 5022 as news of the blasts reached the market. But there was a stunning intra-day recovery. The index closed 1.4 per cent higher in the next session.

The destruction of the World Trade Center and attacks on other locations in the 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 re-opened. 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 and r-emerge stronger.

Back home, investors have displayed similar grit. After the terror attacks across Mumbai in November 2008, there was gloom all around. But the Sensex managed to gain almost 4 per cent on November 28.

On March 12, 1993, when bombs exploded in multiple locations including the BSE, the casualty list included sub-brokers and investors; offices of brokerages were damaged. Yet, when trading resumed the next day, far from a crash, the Sensex rose 2.5 per cent.

Similar was the reaction in July 2006 when bombs went off on Mumbai suburban trains. The next day markets opened on a downward blip but rose strongly and Sensex ended the day with gains.

Published on November 15, 2015

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