India stocks rise after militant attacks

By V. Ramakrishnan

MUMBAI (Reuters) - India's stock market wobbled then fought back to end higher on Friday, while the rupee neared a recent record low in the first day of trade since attacks in the financial capital, Mumbai, which killed at least 121 people.

Bond yields touched their lowest level in more than three years in anticipation of interest rate cuts from the central bank to shore up confidence battered by the global financial crisis and the series of deadly attacks around the city.

Economic growth for the September quarter beat expectations but still slowed to its lowest pace in nearly four years.

People trickled back to work in the business district in the south of the city, although security operations continued into the day in three locations, including two luxury hotels, to flush out Islamic militants and free trapped staff and guests.

"Guns don't control the markets. It's the fundamentals that control the market and today you saw the economic growth numbers that were ahead of the forecast," said Amitabh Chakraborty, president of equities at Religare Securities.

"In the short-term, however, the country's risk premium will go up and it will not be viewed as a safe destination."

The 30-share BSE index ended up 0.7 percent at 9,092.72, after opening down 1.5 percent. Analysts said it was helped by short-covering on monthly contract settlement, delayed from Thursday when the market was closed.

It has already fallen 55 percent this year, badly pummeled by an outflow of foreign capital as a result of the global financial crisis, and for the past few weeks has been trading at its lowest levels for three years.

"The immediate aftermath of the Mumbai terror attack, immediately in the near term, there will be a negative sentiment," Finance Minister Palaniappan Chidabaram said.

But longer term he was confident investment would continue to be made in the country.

RUPEE ON THE SKIDS

Shares in Indian Hotels Co Ltd, which runs the Taj Mahal hotel at the center of one militant operation, fell 17 percent to their lowest levels in more than four years.

Hotel operator EIH Ltd, which operates the Trident-Oberoi hotel also hit by attacks, gained 5.2 percent.

Commandos took control of the Trident-Oberoi on Friday, some 36 hours after the evening strike on the city. Mumbai police chief Hassan Ghafoor said 24 bodies were found in the building.

But battles raged through the day with militants holed up in another luxury hotel and a Jewish center.