SBI tries to calm market jitters after PoK strike
- The report believes the surgical strikes will have no impact on the markets.
- During the Kargil war, domestic stock markets had showed initial decline but recovered after that.
FollowIndia's strike on terror launch pads last night across the Line of Control (LoC) is unlikely to have any significant impact on the financial markets thanks to the strong macroeconomic data, says a report by SBI.
"While the initial response of the financial market has been negative, we believe such attacks are unlikely to have any material impact on the markets," SBI said in its report 'Ecowrap'.
The stock market benchmark Sensex came under severe selling pressure and plunged 465.28 points or 1.64 per cent to 27,827.53 at close today. The domestic currency depreciated over 40 paise to close at 66.84.
The report said Indian economy is currently on a sound footing with favourable macro numbers.
During the Kargil war from May to July 1999, leading indices of domestic stock markets had showed initial decline but recovered after that.
Sensex and Nifty had dropped by 286 and 79 points, respectively, in three trading initial days, but recovered after that and had ended higher by 652 points and 191 points when the Kargil conflict ended.
The rupee depreciated by 1.2 per cent to 43.3 on July 26, 1999, from 42.8 on May 26, 1999, against the dollar, while the ten-year yield had shown a minor change of 2 basis points.
India had a fiscal deficit of close to 6 percent in the financial year 1999-2000, and the rupee stayed at nearly the same level during the rest of the fiscal year, indicating that the value of the rupee is more determined by external factors.
"The overall impact of the Kargil war was positive. The economy grew at the same pace in the financial year 1999-2000 as the year before -- a healthy 6.5 percent," the report said.
The report believes the surgical strikes will have no impact on the markets as in the case of Kargil war because these conflicts are localised in nature.
"Also, now that India has explicitly reaffirmed that its patience cannot be taken as granted, these will in fact act as a positive for the markets for the decisiveness in the county's foreign policy," the report said.
