Markets face uncertainty after quake

"The software sector will continue to be driven by the international market while the much awaited-interest rate cut could provide further impetus to the market," said UR Bhat, chief investment officer at Jardine Fleming India AMC which manages nearly Rs 3100 crore ($666.8 million).

Several major companies with key production in Gujarat reported no serious damage following the quake, which is likely to help insulate their shares from aggressive selling. Reliance Petroleum has a 540,000 barrel-per-day refinery at Jamnagar on the coast, making it India’s largest single refinery. Reliance Industries, the nation’s largest petrochemical maker, has a worldscale plant nearby.

"Product dispatch will continue normally," a Reliance group spokesman said on Friday, following the earthquake. "After checks with Jamnagar and Hazira, I can say for now that our plants and people are safe."

Other oil installations said their plants were not affected. Indian Oil Corp, India’s biggest oil refining company, and Bharat Petroleum, Hindustan Petroleum and Essar Steel all have plants in Gujarat. The country’s busiest port at Kandla was slightly affected by the quake but officials announced it was operational by Sunday.

It may be recalled that Taiwan stocks fell sharply in September 1999 after an earthquake that killed more than 2000 people. Key areas of Taiwan’s economy, including computer chip makers, had been damaged by the earthquake. However, foreign funds continued to flow into Taiwan even as share prices fell, and analysts said they expected foreign funds to continue flowing into India.

Fund managers have increased their allocation to emerging Asian markets and Europe after pulling out of Japan, a Reuters poll of 52 managers and strategists in Japan, Europe, Britain and the United States showed. And another rate cut in the United States would help increase the flows, analysts said.

Foreign funds have bought a net $648.5 million of Indian stocks in January, more than 11 times last January’s figure of $55.9 million and almost half last year’s total of $1.5 billion.

"The rupee is likely to come under pressure. In fact, the rupee which gained sharply in the last two weeks had fallen against the dollar on Thursday. It’s a major calamity which took many human lives… naturally the financial markets will be affected. But the markets will always bounce back," said a dealer. India’s rising forex reserves of over $ 40 billion will be one major plus factor.

As the union budget is to be unveiled next month, marketmen expect the government will work out some new schemes to rehabilitate people and business in the region.