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India's Bombay Stock Exchange Index Soars - 2003-09-28


India's stock markets have surged this month to their highest levels in more than two years. The buoyant markets reflect a new optimism in the Indian economy.

Good news continues to pour in for the country's stock markets. For the second time since mid-August, the key Bombay Stock Exchange index surged this week, rising to levels not seen since February, 2001. Overall, the index has climbed by more than 50 percent since April.

Market analysts attribute this week's rise in stock prices to large investments by foreign institutional investors.

An economist with the Federation of Indian Chambers of Commerce and Industry, Anjan Roy, said the revival of the stock markets reflects an overall confidence in the economy. "By and large the companies are doing fine, the Indian economy is in good shape, and there is a "feel-good" factor about the economy and its prospects, particularly because the monsoon has been very prolific this year," Mr. Roy said.

The booming stock markets were not affected by deadly terrorist bombings that killed more than 50 people in Bombay last month.

Economists point out that the recent surge in stock prices is not restricted to the country's famous information technology sector.

A range of what are known as the "old economy" industries - traditional manufacturing industries such as cement, steel, and automobile parts - are equally buoyant.

Economic analysts cite several reasons for the new confidence. After India liberalized its economy in 1991, many companies have restructured to emerge more competitive, and have been posting growing profits.

Exports increased by nearly 20 percent last year, and the trend is expected to continue this year. Falling interest rates in recent years have given businessmen access to cheaper capital. And this year's good monsoon rains have restored confidence in a country where half the gross domestic product comes from the farming sector.

The surging stock markets are expected to boost consumption and investment, keeping the economy on the path to growth.