Indian SEs mourn longer than US peers

Nitin Mathur

New Delhi, Oct 15: The terrorist attacks on the US seem to have rocked the Indian equity markets harder. While the US markets have been able to recoup most of their losses since the September 11 attack, the Indian bourses are still languishing way below their pre-attack levels. The US technology index, Nasdaq had closed the week ended October 12 higher than its September 10 level, but the BSE IT index lost a whopping 24 per cent compared to its September 10 level.

According to a Delhi-based broker, “Indian tech stocks seem to be hit harder than those on the Nasdaq because the BSE IT index includes a lot of second-rung IT companies which have not been able to make a comeback even during the rally in the past three weeks. The inherent strength of the Nasdaq-listed companies has helped them recoup all their losses.” As many as 26 out of the 30 Sensex stocks were trading below their quotes prior to the attacks.
These included Sensex heavyweights from both old and new economy sectors like Infosys Technologies, Reliance Industries, Satyam Computers, Larsen & Toubro, Zee Telefilms, Reliance Petroleum, BHEL, Glaxo, Nestle and NIIT.

Another Delhi-based broker said, “In times of crisis, money flows from weaker markets to stronger markets, from weaker stocks to stronger stocks and from aggressive instruments to defensive investment options. Thus, the money seems to have moved out from Indian markets to stronger markets like the US.” The broker added that while the money allocated for emerging markets may not have moved into the US, it may have gone to other stronger emerging markets.
Besides, a shift from equity to debt and other safer instruments cannot be ruled out. Hindalco was the biggest loser due to the carnage that followed the US attacks. While the stock has plunged 22 per cent from Rs 654.84 to Rs 496.1 as on September 26, it could recover only to Rs 510.75 as on October 12. Cipla was close behind with a loss of over 20 per cent closing at Rs 1,045.65 on October 12 from Rs 1,308.5 as on September 10.