Indian financial markets will stabilise soon: Experts

equityMumbai, (IANS) : Indian financial markets are expected to make a recovery in just a couple of sessions after being hit by panic selling on Thursday following surgical strikes by Indian forces on terrorist launch pads across the LoC (Line of Control) in Pakistan, experts maintain.

The equity markets, which otherwise started trading on a firm note, remained volatile and closed sharply lower after the Indian Army on Thursday made the announcement about the strikes across the LoC.

But both the Finance Ministry and analysts felt the markets will bounce back.

“Terrorism is the biggest threat to our financial and economic stability, and growth. So, decisive action against terrorism will spur growth,” said Economic Affairs Secretary Shaktikanta Das, soon after Finance Minister Arun Jaitley said India can repel any force that subverts peace.

“The foreign exchange and stock markets should stabilise in a few days’ time.”

Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services said: “There was panic liquidation on reports of developments across the LoC. But history has shown such events only have a short-term impact on financial markets and the recovery is often swift.”

Amid investors’ concerns over escalation in tension between India and Pakistan, the F&O (futures and options) expiry, too, kept stocks volatile, and Nifty VIX, a measure of volatility, rose by almost 35 per cent to 18.29.

Dhruv Desai, Director and Chief Operating Officer of Tradebulls, elaborated: “Earlier in the history of markets, this kind of movement has been seen, even worse falls than these have been witnessed.”

“On some events like RBI (Reserve Bank of India) policy, US Fed policy and Union Budget etc., a significant magnitude of volatility is usually visible.”

From a fundamental perspective, Nitasha Shankar, Senior Vice President for Research with YES Securities, said the Indian markets are attractive for long-term investors.

“Such dips present a good buying opportunity which is visible in the recovery from the days’ lows.”

The key Indian equity indices had receded around 12:30 p.m. on Thursday, after the Indian Army said that it has inflicted “significant casualties” in the operation to neutralise terrorist launch pads.

A roller-coaster ride thereafter also saw some indices recovering, albeit marginally, but only to fall again and close significantly lower.

The barometer 30-scrip sensitive index (Sensex) of the BSE opened strong at 28,423.14 points on Thursday, against the previous close at 28,292.81 points. By the time the news briefing by the Indian Army ended, the intra-day fall was as much as 750 points.

After a subsequent volatile session, where some investors were also resorting to value buying amid overall concern over escalation in tension between India and Pakistan, the key index ended with a loss of 465.28 points, or a 1.64 per cent drop, at 27,827.53 points.

India’s National Stock Exchange (NSE) closed lower by 153.90 points, or 1.76 per cent, to 8,591.25 points.

The Indian rupee too tumbled during the intra-day trade. It reached its lowest level in the last one week.

The Indian currency, which opened at 66.44 to a US dollar, had already depreciated in the initial hours of the day’s trade in line with the weakness in Asian currencies.

The sharp fall occurred around 1.00 p.m. when the rupee depreciated to 66.95 to a US dollar. This level was last seen on September 22.

However, the Indian currency bounced back marginally to 66.85 to a greenback before speculative selling dragged it lower to 66.86-87 at 5.00 p.m.

“Indian rupee along with Indian bonds and Indian equities made a knee-jerk reaction as markets digested the news of India’s surgical strikes against terrorist camps,” Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, told IANS.

“Rupee weakened towards 66.92 from 66.40 levels. However, intervention from the central bank contained the slide. We hope the geopolitical situation is contained.”

Banerjee pointed out that once the situation stabilises, then the rupee and bonds will be able to recover in the coming sessions.

“India’s macros are strong and such knee jerk reaction do not sustain beyond a couple of sessions. We expect a near term range of 66.40-67.20,” Banerjee said.


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