The Telegraph
Since 1st March, 1999
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Markets turn clueless in crossfire
- Dalal Street wants to get over it

Mumbai, March 20: Markets surged on anticipation that the campaign against Iraq would clear the way for a quick outcome, but hopes that it would happen receded as the day wore on and the combat turned messier.

Mumbai woke up to images of US jets pounding Saddam Hussein’s lairs as the BSE sensex fought war-nerves with a 72-point surge that took the index to this year’s peak. It shadowed spikes in Japan, where Tokyo’s benchmark Nikkei average closed 1.79 per cent higher at 8,195.05.

The 30-share sensex opened lower at 3,118.80 and scaled an intra-day high of 3197.66 before closing at 3192.93, a spurt of 71.75 points, or 2.30 per cent, over its previous close; the BSE-100 was up 31.75 points at 1572.37.

Fuelling the surge was foreign funds’ dash for infotech shares and bellwethers like Reliance, which closed Rs 8.65 higher at Rs 293.90. Infosys was up Rs 188.80 at Rs 4378.85; Satyam gained Rs 11.40 at Rs 205.70.

“The uncertainty is finally over after months of speculation. Markets here were playing catch-up as the launch of air strikes by US-led forces ended the suspense,” said Karthik Ramkrishnan of Sunidhi Consultancy.

Across the globe, investors looked past the opening salvo of war to concerns about how long the conflict would last, leaving many financial markets range bound.

The lack of clarity about what was to come in Iraq sent European stocks swinging in a tight band, but fuelled demand for safe haven government bonds. Investors had been hoping for a so-called relief rally, but tempered hopes when it became apparent that today’s attack was limited. “I don’t see any reason to buy more equity until we get some clarity on how this war is going to go,” said an equity trader at a German bank.

In Europe, London’s FTSE was marginally up 0.30 points at 3765.70, while Paris’ CAC was down 27.10 at 2810.58 in late trading. In America, Standard and Poor’s 500 index rose 2.19 points at 876.21. The blue-chip Dow Jones industrial average gained 25.35 points at 8290.80. The tech-laced Nasdaq Composite Index jumped 8.86 points to 1405.93.

“The market is sitting on an edge,” said Robert Sellar, a fund manager at Aberdeen Asset Management. “We need clarification of the timing of activity. Is it going to be short and sweet, or protracted'”

Widespread hopes the war will be brief and leave the US economy relatively unscathed have added 741 points to the Dow over the last six sessions. But worries remain that Saddam may torch oil fields, US forces could get bogged down or the war will spark attacks on the United States as anti-American sentiment rises.

Back home, the conflict appeared to bring a mixed bag for companies. While some, like makers of gems and jewellery, saw a big hole in their $ 8-billion annual earnings from overseas sales, others had to something to cheer.

“Everybody is hoping that the war ends in a week. There will be adverse effects if it drags on,” Gem & Jewellery Export Promotion Council chief Sanjay Kothari said.

One of those who stand to benefit are steel firms, which expect to ship more steel to China after the US ordered scaled-down exports to the Communist nation. Tisco, Essar Steel and SAIL closed with big gains today.

Rupee wobbles

The rupee slid to 47.76 against the dollar from Wednesday’s finish of 47.70 after dipping to intra-day lows of 47.85 on a virtual scramble for greenbacks all round. Skittish operators rushed to cover short dollar positions in early trade and sent the currency hurtling to its low of 47.85.

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