TNN

Mumbai, Nov 28: As a knee-jerk reaction to Wednesday's terror attacks, bourses may witness heavy selling if the markets open for trading on Friday. However, with the global markets showing signs of recovery, the Indian market could follow suit after the initial reactions to the attacks are absorbed.

On Thursday, the Indian markets were closed but in the Singapore (SGX) market the nifty index futures closed 4% lower. Market players here are used to taking cues from the SGX Nifty futures since these contracts, because of the difference in time zones, opens before the Indian market. In case the SGX nifty futures again opens lower on Friday, the Indian market could go the same way. The saving grace for the Indian market could be the trading holiday in the US t on Thursday because of Thanksgiving.

The expected slide could come as early as Friday. But given the way the flushing out of terrorists from the three places in the city is progressing, some question marks still hang on the market's opening. The government on Thursday had made the areas around hotels Taj and Oberoi nearly out of bounds for general public. If the situation does not improve this advisory would continue on Friday too leading to another no trading day. "Over 25% of the brokerages and a large number of mutual funds that are active in the market are in the Nariman Point, Colaba and Fort areas (the same areas where terrorists were holed up till Thursday evening and fighting security forces),'' said the head of derivatives trading at a local brokerage.

Going forward the fundamentals would again take centre stage, along with global cues, brokers and dealers said. "The terror attack won't impact the markets in any big way,'' said Motilal Oswal, chairman, Motilal Oswal Securities. Sentiment could be impacted in the short run but with global markets doing good, the Indian market could soon follow suit,'' Oswal said. On Wednesday, among other indices, the Dow Jones Index closed nearly 250 points higher.

There are however contrasting factors that investors would take into consideration while deciding which way to play the market, analysts say. On one hand, even after slowdowns in several sectors, the Indian economy is poised to grow at about 7% this year, which could be one of the best in the world. This alone could attract foreign money into the market, but as of now FIIs are surely in the mood to take money out of India.

So far in the year, net FII outflow was $13.5 billion, data released by Sebi showed. In case FIIs continue to sell, backed by their objective of flight to safety whatever the economic conditions, then the sensex could continue to slide.

Another factor that is almost sure to impact the market sentiment is the uncertainty about the upcoming general elections, scheduled for the first half of 2009, brokers said.