The Indian stock market was doing very bad, like all other global markets, but any hope of recovery was destroyed when militant attacks hit Mumbai and caused death to 104 persons. People expect that the Bombay Stock Exchange will fall very fast when trading begins again on Friday.
This Thursday, the exchange and all other major bourses like the National Stock Exchange and the currency exchange were suspended because of these militant attacks. This is not the first time that there has been an terrorist attack in Mumbai. In 1993 there has been a similar attack on three hotels and the Bombay Stock Exchange. But the attacks now are different from the ones that happened in 1993 because now the attacks threaten to increase the instability in the country, and it is already suffering a lot due to the financial crisis.
A few weeks earlier, the International Monetary Fund forecasted that the growth of the Indian economy would decline with 0.6%. Tougher credit conditions from the banks will lower the consumer spending and the country’s IT outsourcing sector is also going to have troubles in the near future. The Indian economy strongly depends on the American customer, and when they spend less money, the economy of India will suffer a lot. This is already happening on the Indian equity market. Foreign Investors have pulled out their investments to invest in more safer products. The leading Sensex index has already lost 56.0% since the start of the year.
The militant attacks will have great consequences for the Indian economy. The business will be discouraged and tourism will decrease as well, because the attack happened in what is a prime location for tourists and business people. When people want to invest they want to invest in a country that has law and order. With the lack of confidence of the investors, this kind of attack was the last thing India needed.
It is the first time that I hear news about the economy of India. It seems that the Indian economy is having a lot of trouble, just like all other great economies at the moment. The militant attacks will have a very great impact on the confidence of the investors, and this comes at a really bad timing for the Indian economy. Because they needed to close the bourse, for the safety of the people, investors will pull back a lot of their capital they had invested in India.
The real consequences of the attacks will only be clear within a certain period, but the prospects don’t look very good. It will be necessary for the Indian government to restore the peace and try to keep the damage done as low as possible.
Source: Forbes: Mumbai Markets Poised For Fall
http://www.forbes.com/markets/2008/11/27/india-outlook-friday-markets-equity-cx_vr_1127markets10a.html
Abonneren op:
Reacties posten (Atom)
2 opmerkingen:
I agree with you Jens, in these times it is very bad to have bad news about a country. When there is a war this is off course very bad. A war is always uncertainty, also on the markets so they need to keep the peace to restore the markets.
I agree with Jens and Wouter. When a country comes badly into the news, that is not good for the whole economy.
Investors will think twice before they made an investment. It is not good for the tourist sector also. For countries like India that is an important source of income for the habitants.
Een reactie posten