Mumbai Terror Attacks: Edelweiss Impact report
Further to the Terror attacks on Mumbai over the past 48 hours, Edelweiss has put together an impact analysis for your consideration.
Comments from the Edelweiss team:
We do not see any long term impact of the terrorist attacks on the economy or the capital markets though some weakness is likely in the near term. The city of Mumbai has shown remarkable resilience in the past and business conditions have quickly returned to normal – we do not expect this time to be any different. Even currently, apart from certain parts of South Mumbai, business is proceeding as usual in other parts of the city. However, in the short term certain industries such as tourism and hotels are likely be impacted. We will send a detailed note subsequently.
Market falls have been minimal during past terrorist attacks
The immediate impact of past terrorist attacks on equity markets has not been significant. The indices have shown falls of less than 0.75% in most instances with only 1 or 2 instances of fall of over 1% (Source: media reports).
In the current instance we do not expect anything different. However, the general weakness in the markets may cause some downward pressure.
S&P has indicated that these attacks by themselves would not have any impact on ratings. Moody’s has echoed a similar sentiment but mentioned that they would look at the actions of the government in controlling the situation as well as restoring confidence.
We expect both, tighter anti-terrorist laws and more stringent security measures to come out of this; this should again be positive in the medium to long term.
Tourism and hotel industry expected to have the most impact in the near term
Foreign tourist inflows are likely to slow down. Western countries have either issued travel advisories or cautions. Media has reported about 15% cancellations in airline bookings currently. Overseas clients, such as those of Indian IT companies, may postpone their visits but this may not have much impact since business travel to outsourcing destinations is anyway low due to holidays in the Western world.
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