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Rolling the war dice

May 25, 2002

The bourses saw the back of one of the worst weeks in recent times. The indices closed with a loss of just over 2%. The market movers should thank their lucky stars for the PM’s remarks, which resulted in a 4.6% surge on Friday. It could have been a lot worse. As you can make out from the opening comments, an Indo-Pak war was ‘top of mind’ for all investors. The week saw movements solely based on this notion. The indices touched levels not seen in the last five months. Had the PM not given the so-called positive remarks, we could have been nearer to the Post September 11 levels.

The coming week is likely to be again dominated by the Indo-Pak standoff. Though the PM made some gesture about a no war possibility, it will be foolish to take him at face value. There was too much that was not said in his address. Also, the continuing skirmishes across the LOC point to the fact that war clouds have not passed as yet.

The government’s hardened posturing will not make it easy for India to back down without some tangible gains to show back home. At the same time the Pak General cannot afford to look like a weakling in front of his country. So it may be a while before both reach some sort of conciliation.

With the global attention focused on this conflict, Indian policymakers will try to get maximum mileage for India’s cause. So it may be that the other side may give in to some of India’s demands. But given the mistrust between the two neighbours, whether such peace will be lasting or not is another question, which investors have to grapple with.

So investors should not get into the markets with a view to make a quick buck, as the situation is too fluid to take such risks. After all a war between two nations is no joke. But investors with a long term view could look at some key pivotals that are available at attractive valuations at this juncture.

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