Page last updated at 14:44 GMT, Thursday, 27 November 2008

Indian markets shut after attacks

Indian policemen cordon off the site of an attack in the Colaba area of Mumbai
It is unclear when trading in Indian markets will resume

Financial markets in India have been closed after the attacks in Mumbai, the country's business capital.

But India's central bank said it would continue to make cash available on the interbank lending markets.

Analysts say the attacks could have a short-term effect on business and foreign investment in India in an already uncertain financial climate.

Since the start of 2008, the main stock index has fallen 50% while the rupee has fallen 20% against the dollar.

"In the short term, will have an impact. It will take time to heal. [But] I don't think it will have an effect on portfolio investments in the country," said Ranu Vohra at Avendus Advisors PVT.

The UK India Business Council (UKIBC) said the attacks were a "wake-up call" for the Indian government on security issues, but they would not affect the multi-billion trade ties between the two countries.

"It's a shock for all of us but...we believe India is and can be capable of bouncing back very, very quickly," said UKIBC's chief executive Sharon Bamford.

Difficult times

Business sentiment will be affected. It doesn't bode well for business
Amar Lulla, Cipla

Previous attacks in India were barely noticed by financial markets, analysts said. But current tough market conditions will exacerbate the impact of the attack on the economy.

Foreign investors have already pulled $13.5bn from India since the financial crisis started.

"Clearly, it will be negative for the sentiment towards India at this point of time, the time when the world is already looking to be highly uncertain in terms of its growth prospects," said Joseph Tan at Credit Suisse, speaking about the Mumbai attacks.

"This will be negative for the rupee versus the dollar, but again I want to stress that the impact will be short-lived," he added.

"Business sentiment will be affected. It doesn't bode well for business," said Amar Lulla at Cipla, the drug company.

Chinese cut

Elsewhere in Asia, markets rose after China cut its interest rates to 5.58% from 6.66% on Wednesday. This was the country's largest rate cut in a decade.

Japan's Nikkei index rose 1.9%, Seoul's Kospi index was up 3.3% and the Hang Seng index in Hong Kong added 2.7%.

However, analysts remain cautious.

"The key ingredient that's driving the gloomy outlook is actual demand, especially from advanced economies," said Suan Teck Kin at United Overseas Bank in Singapore.

"These [China's rate cuts] would help spur some investment and spending activities and support the fiscal initiatives but the main driver would still be from actual spending," he added.

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