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Thursday, 13 December, 2001, 12:17 GMT
Indian markets hit by shooting
The Bombay Stock Exchange
Stocks fell as a reaction to the shooting
India's financial markets have been shaken by an attack on the Indian parliament which killed 12 people.

Shares fell sharply in the immediate aftermath of the attack while currency markets were volatile.

However, markets stabilised when it became clear no senior officials had been hurt in the attack.

The Indian rupee regained its poise after strong selling of dollars, which many market watchers suspected was an intervention orchestrated by the central bank.

Rand falls

Emerging markets around the world were also affected by the events in India.

Emerging markets are often very sensitive to difficulties in similar markets, and currencies and stock markets often move in sympathy - a syndrome known as contagion.

The news from India came at an already tense time for emerging markets.

Argentina has just one day left to scrape together $900m in order to avoid defaulting on its debt.

A default on its debt would cause banks to be much more cautious about lending to other emerging markets.

South Africa has been particularly vulnerable to this sort of contagion selling over the past months.

And the rand - which has plumbed all-time lows over the past few months - slumped to a fresh low of 11.3 to the US dollar following the Indian shooting.

Signs of recovery

The leading index on the Bombay stock exchange dived more than 3% to 3,308 shortly after the first reports of the firing.

But fears eased after it became clearer that no ministers or senior officials had been harmed in the attacks.

And the index showed some signs of recovery before the markets closed, ending down 0.5% at 3,393.5.

The rupee fell to 47.9 per dollar before stabilising after a suspected intervention from the central bank.

The central bank usually intervenes through state-controlled banks to curb excessive volatility.

See also:

13 Dec 01 | South Asia
Indian parliament attack kills 12
06 Sep 01 | Business
Indian probe unearths share fixing
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