Indian markets to see 'relief rally' on hopes of short Iraq war

Tuesday, 18 March 2003, 08:00 Hrs   |    1 Comments
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NEW DELHI: India's badly beaten-down shares is likely to witness a short relief rally when trading starts Wednesday, as bruised investors bet on a quick resolution of the imminent U.S.-led military strike on Iraq.

Analysts and traders expect the market to open firm and stage moderate rally in the early trade Wednesday after U.S. President George W. Bush's ultimatum to Iraq cleared uncertainty that had hung over global markets for months.

The Indian stock markets were closed Tuesday for Holi.

"A relief rally in blue-chip equities will be perfectly in order when the market opens for trading tomorrow (Wednesday)," said Neeraj Deewan, a stock market analyst with New Delhi-based Prime Securities.

"Bush's ultimatum to Iraq has cleared all uncertainties about war that wrecked investor sentiment in the last few weeks. The president's speech has left little doubt in investors' minds a U.S.-led attack on Iraq is imminent," Deewan told IANS.

"I think investors will pick up heavyweight counters, which have come down sharply lower on massive selling pressure, on hopes that military action against Iraq will be swift with little damage to oil supply and the global economy as a whole."

Abandoning diplomacy, President George W. Bush gave Iraqi President Saddam Hussein an ultimatum to leave the country with his two sons within 48 hours or else face an imminent military attack.

Bush gave his warning to Saddam Hussein in a televised address to the nation Monday night after he failed to get the backing of U.N. allies for a Security Council resolution sanctioning military attack against the Iraqi regime.

For months, the prospect of military action against Iraq, which has the world's second-largest oil reserves after Saudi Arabia, has driven up oil prices and weighed heavily on the financial markets across the globe.

Analysts say while India may manage to absorb the impact of a short war with little damage to oil supply, a long and messy military campaign would result in soaring oil prices, quashing the economy's attempts to right itself.

India's blue-chip share market index ended in the negative zone Monday, extending the loss to third consecutive session, as talks of a possible U.S.-led military attack on Iraq gained ground.

Reflecting the bearish sentiment, the market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed at 3,084.91, a loss of 23.33 points or 0.75 percent from its previous session's close.

For the one-month period ended Monday, the key market index is down 197.54 points or nearly six percent.

Hopes of a moderate recovery in the coming sessions has also gained ground after the U.S. stock markets staged a smart rally Monday, as investors snatched up battered shares.

The blue-chip Dow Jones industrial average 3.59 percent to 8,141.92 and the tech-laced Nasdaq Composite Index 3.88 percent to 1,392.27.

Expectations of a quick resolution to the war also boosted market sentiment across all the major stock markets in Asia Tuesday with the benchmark indexes rising two to four percent.

Japan's benchmark Nikkei average jumped 2.12 percent in Tuesday morning trading in Tokyo after a Wall Street rally on expectations for a swift and decisive U.S.-led military strike on Iraq.

"Most investors and fund managers are saying it will end soon, probably within a week or ten days. If that actually happens, it will be good for stocks," said a stockbroker with the Bombay Stock Exchange.

"If the war is short and inflicts limited damage on oil flows, then I think the consumers will return to the bourses because most of the heavyweight stocks have come down to attractively lower levels," he added.

Deewan of Prime Securities, however, said that the overall market sentiment would continue to be cautious, as investors wait for the war to get over before rushing into the trading ring for bulk buying.

"Even if a relief rally takes place, it will be a short-term push because no one really knows how the war will pan out. But if it takes place and ends quickly, everything can get back to its normal pace."
Source: IANS
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