India's stock markets rose slightly Friday despite the deadly terror attacks in the nation's financial hub, Mumbai. However, as Anjana Pasricha reports from New Delhi, there are fears that the massive attacks on high profile targets and foreigners could diminish confidence in an economy already impacted by the global slowdown.

Indian commandos take positions close to where Jewish families have been taken hostage in Mumbai, 27 Nov  2008

As Mumbai's Stock Exchange resumed trading Friday morning, just a few kilometers away, commandos and soldiers continued to battle gunmen holding hostages inside two plush hotels, and a Jewish Center.

But the devastating attacks on the city failed to panic the markets. The main stock index, the Sensex, ended at 9,092 points, up by less than one percent.    

Some were not surprised. They say Mumbai, India's financial hub, is no stranger to terror strikes and will bounce back.

However, business leaders worry that images flashed around the world of commandoes storming luxury hotels to rescue foreigners in the nerve center of the Indian economy could shatter investor confidence.

They point out that the latest attack was different from any other in India. It targeted the city's prime hotels - Taj Mahal and Trident-Oberoi, which host affluent domestic and international travelers and are the venue for high powered business meetings.

K.V. Kamath, managing director of India's largest private sector bank, ICICI, says there will be a negative impact.  But  he hopes it will not last long.
 
"It is a blow for business in general because I think that this clearly shows our institutions could be vulnerable, whether it is institutions of commerce like hotel, or doing any sort of business, it could be vulnerable," he said.

In a country where many think the government has not shown a will to tackle terror, there were widespread calls for tighter security.

Shivinder Singh of Fortis Hospital says the Indian economy is resilient, but it is important for the government to ensure the safety of citizens and foreigners.     

"As an economy we need to get this behind us, get it back on track and make sure we have enough security, and it does not happen again," said Singh.  "That is the biggest emphasis. To strengthen our systems"

Others expressed confidence that foreigners wanting to invest in India will not be deterred. Chief Asia strategist at Merrill Lynch, Mark Matthews, told local television the attacks in Mumbai - also known as Bombay - are unlikely to hit foreign investment.    

"People will look past it. Of course things will change a little bit in Bombay," he said.  "You will see a lot more X-Ray machines and a lot more vigilance around offices and hotels, but people will get used to it. It is what you get when you visit many other countries in Asia, when you go to Colombo, when you go to Jakarta."  

The attacks come at a time when India is struggling to minimize the impact of the global financial crisis on its economy, which is slowing down after five years of high growth.

The global financial crunch has prompted foreign investors to pull more than $13 billion out of the country. Since the start of the year, the main stock index has lost 50 per cent, while the Indian currency, the rupee, has fallen nearly 20 percent against the dollar.