Mumbai exchanges volatile after bomb blasts

Shares in Mumbai have rebounded from early losses that followed the series of bomb blasts in the city on Wednesday evening.

The Mumbai Stock Exchange's Sensex index rose 0.6%, while the National Stock Exchange's Nifty index was up 0.7% during midday trading.

The two indexes had fallen initially by as much as 6% after the markets opened.

The last time the city experienced a similar attack in November 2008, stocks fell by almost 2%.

Investment concerns

The blasts come at a time when foreign investment in India has been under pressure.

There were concerns that security issues may provide investors with a reason to reduce their holdings in markets that are seen as being more risky in the short-term.

Global risk appetite has been diminishing in recent months amid fears over the economic problems in the US and the debt crisis in Europe.

India has also been hurt by the country's high rate of inflation, which has been eroding the value of assets.

The Sensex index has fallen 10% since the start of this year, making it one of the worst performers among Asian stock markets.

However, analysts said that the attacks were unlikely to deter investors away from the country.

"India has shown the ability to bounce back from such events," said Jyotivardhan Jaipuria of Bank of America Merrill Lynch.

"It is not going to have any long-term impact on the investment flows into India," he added.

Long-term growth

Analysts said that despite the blasts, the longer-term view is that India offers too much in terms of economic growth and domestic expansion for investors to remain wary.

India has been one of the fastest growing economies in the region over the past few years, and it is expected to grow by close to 8% this year.

While India has been expanding, developed economies such as the US and Europe are still struggling to fully recover from the effects of the global financial crisis.

They have also been hit by newer developments such as the debt issues in the eurozone.

Analysts said that given those issues, India remained an attractive investment destination, even taking into account its domestic problems and the bomb blasts.

"Emerging markets are looking much better than developed markets given all the problems we have had in Europe and even the US," said Arjuna Mahendran of HSBC Private Bank.

"Everybody out there wants to buy India; the Indian growth story is still intact." he added.