28th Nov, 2008

Experts believe that the impact of the Mumbai terror strike will be short lived as Indian stock market will bounce back and head higher on the back of a strong and resilient economy. IIP numbers, though lower, are still better than the market expectation. There are many persuasive arguments for investing in the Indian economy at the given moment.

The Bombay stock exchange (BSE) 30-share Sensex pulled out of a 1.5 per cent slide at the start of trade on Friday and climbed 0.7 per cent to 9,092.72, its highest close since November. 17. The index rose nearly two per cent on the week, but was down 7.1 per cent in November, falling for a third month.

Mark Mobius, the head of Templeton Asset Management, said the negative impact from the deadly attacks would be shortlived as long-term investors focused on India's still vibrant economy.

"It's a fast-growing economy and we can't allow this kind of incident to sway our decisions regarding where we want to invest," Mobius told Bloom-berg Television. "India will rise from this and prosper."

For long-term investors, Indian stocks offer good bargains after the stock market lost more than half its value this year while the rupee shed over a fifth, making new investment relatively the cheapest in comparison to earnings among emerging markets.

IIP Data on Friday showed the economy grew at its slowest pace in nearly four years in the September quarter, but the 7.6 per cent rise was better than market expectations for 7.2 per cent though below 7.9 per cent in the June quarter.

Farm output grew by 2.7 per cent in the September quarter while factory production expanded five per cent from a year earlier, also slower than in the previous three months.

Services, which account for more than half of gross domestic product, rose 9.6 per cent but again slower than last year's double-digit growth.

The central bank has slashed its main short-term lending rate by 1.5 per centage points to 7.5 per cent in the past two months.

The attacks will also put pressure on the central bank to cut rates to bolster business confidence, traders said.

Ratings agency Standard & Poor's said the Mumbai attacks should not affect India's sovereign rating providing they are an isolated case.

The worst for the stock market investors maybe behind us and the economic and political stability should be the top priorty for the government to bolster investor sentiment..