Army's surgical strikes: India Inc hails action, says conflict unlikely to hit market

MUMBAI: India Inc. hailed the government’s surgical strikes across the border in Kashmir but said the situation shouldn’t escalate into a bigger conflagration that may raise the country’s risk premium.
The market slump on Thursday after the attacks was a knee-jerk reaction and India’s economic fundamentals, which are better than those of many other countries, will dictate investment decisions, said a star-studded panel of executives at an ET CEO Roundtable that included Kumar Mangalam Birla of the Aditya Birla group, Uday Kotak of Kotak Mahindra Bank, Chanda Kochhar of ICICI Bank, Dilip Shanghvi of Sun Pharma, Sachin Bansal of Flipkart, Satyan Gajwani of Times Internet Ltd, Vijay Shekhar Sharma of Paytm and Zarin Daruwala of Standard Chartered Bank.

The move may actually improve perceptions about India’s stability and the country remains the most interesting market for global investors, said Birla.


“I don't think its anywhere close to becoming a war,’’ said Birla.

“In fact it aims at creating more stability in the region than the other way round. I believe what happened in the market yesterday (Thursday) was obviously a knee-jerk reaction. Fundamentals for India remain very much the same. I think it is one of the most interesting markets to invest in and that’s a blip that will pass by very soon."

The plan was well executed from a military and diplomatic point of view, said Kotak.

“India managed diplomacy very well to get the US to come out openly and effectively support this move, which means that the army, frontline and the ministry of external affairs’ foreign policy are all working wonderfully together,’’ he said.

Prime Minister Narendra Modi’s government said on Thursday that security forces had conducted surgical strikes across the line of control in Kashmir against terrorists who were preparing to enter India. Several terrorists were said to have been killed. The Pakistani government said it had been a routine border skirmish.

MARKET TREND
Some of the market’s losses were recouped on Friday as nervousness faded and belief in India’s economic fundamentals persuaded investors to overlook the border event.

“Everyone looks at it as a focussed action, very well executed and something that was required to be done,’’ said Kochhar.

“Look at the market reaction today — they have viewed it in that manner. Of course they would watch what could be a mediumterm or long-term implication to this. But the faith remains on the macroeconomic indicators of the country and the belief is that it is strong. India as an investment destination appears much better than many others."

Corporate India’s outlook and reaction to such events also appears to have changed with some calling for a more aggressive response when needed.

“I believe that a great company or a great country is built with a right amount of aggression and defence in the play,” said Vijay Shekhar Sharma, founder of Paytm. “And if we throw ourselves in a marketplace or along the border, we sort of get walked over. This is the time to go fly airplanes on Lahore if it takes that, or if we need another surgical attack the next time... we should say that we are here and you better bother about it.’’

CAUTION NEEDED
Still, caution was advised as the neighbouring country has the reputation of being an exporter of terror and an army that doesn’t bend to the will of the civilian administration, which makes its response unpredictable.

“The uncertainty is the irrationality that can kick in from the other side,’’ said Gajwani. “I think there is no doubt that the way this was handled, both in terms of handling international consensus building and sending the right messages to our citizenry as well as Pakistan, we have done that very, very effectively.

But it’s not all in our hands.’’ Daruwala echoed the sentiment. “It’s more of a function of what the neighbour will do. I think that uncertainty is something that people will have a cautious note on that,’’ said Daruwala.

The Indian army’s action was a limited operation and is not aimed at a full-fledged escalation of simmering tensions between the nations. “I think the message to the neighbour that this is a specific response and it’s not a war should help minimise the potential risk of an unreasonable reaction,’’ said Shanghvi.