BOMBAY, 31 August 2003 — What a week this has been for India! And more so for the Indian stock exchanges. The twin bomb blasts by terrorists in Bombay, the financial capital of India, followed by the tragic stampede in the Hindu religious ceremony in Nasik, the political drama in Uttar Pradesh, all together kept the country on tenterhooks.

Yet, the stock exchange showed its resilience and bounced back with more vigor, showing the world that the Indian markets are sufficiently metered with the global economy now for political events to make a difference. Despite the terrorist attacks, it was heartening to note that the foreign financial institutions (FIIs) did not withdraw from the Indian bourses, as was the case during the 1993 blasts.

Foreign funds are unlikely to take a negative view of the bomb blasts as the India story is too attractive to ignore. And this fact was further reiterated, following the Reserve Bank of India annual report, which said that the rate of gross domestic product (GDP) growth for 2003-2004 might significantly exceed the earlier projection of about 6 percent made in its monetary and credit policy in April.

On the first day of trading, Monday, the markets began the day as usual. The Sensex was up almost 45 points in the early trades. And then the news came in of the political turmoil in Uttar Pradesh and so the twin bomb blasts in Bombay. There was panic selling across the board.

The Sensex had dipped to a low of 3,943.66 in the intra-day trades immediately after the reports of the bomb explosions. The BSE finally ended the day with a whopping loss of 120.49 points at 4,004.65. While retail investors indulged in a selling spree, operators also unwound long positions in the derivatives segment following the imminent expiry of August 2003 series futures contracts.

Most of the stocks were in the red in the selling frenzy following the blasts. The banking shares were the star performers in the early trades, following RBI’s repo rate cut by 50 basis to 4.5% from 5% with effect from Aug. 25, taking the rate to its lowest level since daily repo auctions began in 2000.

Once the news of the blasts erupted, even the banking stocks fell like a pack of cards. The bourses seemed to have bounced back with a vengeance on Tuesday.

The BSE ended with a huge gain of 147.66 points at 4,152.29. Old Economy — steel, cement and automobile — stocks were back in the limelight on renewed buying. Steel stocks like Tisco, SAIL were the market movers of the day on the back of talks of a likely price hike in steel and the growing Chinese demand.

On Wednesday, the BSE settled 53.27 points higher at 4,205.56, closing above the 4,200-mark for the first time after March 1, 2001. Buying support was seen almost across the board, stocks in the banking and tech sectors were in the limelight.

On Thursday, the markets began trading on a volatile note but toward the end, it became stable. Pharma stocks offset losses in Old Economy stocks. The BSE ended seven points higher at 4,212. Pharma stocks were the toast of the day.

News that US has reached a settlement with India, Brazil, South Africa and Kenya, whereby poor nations can buy life-saving drugs that they cannot manufacture from generic drug makers in developing countries pushed up Pharma stocks.

And on Friday, markets advanced further in midafternoon trade helped by sustained gains in stocks across the board. Selling pressure was seen in stocks like ICICI Bank, MTNL, Satyam Computer, Zee Telefilms, Castrol India, State Bank of India and Hindustan Lever. But buying outweighed selling and the BSE ended the day with a gain of 32.44 points at 4,244.74, its best close since March 1, 2001.

Pharma stocks continued to shine. The new resolution, allowing poor countries to import life saving drugs is yet to be passed by WTO.