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India stocks rise after militant attacks, rupee weak

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.

The Bombay Stock Exchange building May 22, 2006. REUTERS/Punit Paranjpe

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 pummelled 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 Chidambaram 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 centre 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 centre.

The partially convertible rupee slid towards a recent record low against the dollar, closing at 50.09/12 per dollar, near the 50.60 trough set earlier in the month.

The benchmark 10-year bond yield ended at 7.07 percent after dipping to 7.04 percent, the lowest in more than three years and below Wednesday’s close of 7.09 percent.

“Some people feel that rate cut expectations have increased after all these (attacks),” said Piyush Wadhwa, a senior vice president at ICICI Securities.

Data showed economic growth slowed to 7.6 percent in the September quarter from a year earlier, below the June quarter’s rate of 7.9 percent and the slowest pace in nearly four years.

The economy has been battered by high borrowing costs and the global financial crisis.

“One should remember that this data is backward-looking. Demand conditions, external as well as domestic, have worsened significantly since September,” said A. Prasanna, an economist with ICICI Securities in Mumbai.

Additional reporting by Anurag Joshi and Swati Bhat in Mumbai, Sumeet Chatterjee in Bangalore and Surojit Gupta in New Delhi

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