Markets survive multiple global scares

World markets went through a topsy-turvy ride as worries mounted over a potential nuclear catastrophe in Japan even as it coped with last week's powerful earthquake and the consequent Tsunami. To make matters worse, the violent uprising in the MENA worsened, with Bahrain calling troops from neighbouring Gulf nations and Gaddafi forces making further inroads against the rebels. A downgrade of Portugal also revived concern about the financial condition of some eurozone nations.



But, as they say 'all is well that ends well.' So it was with world markets. Stocks bounced back after the Group of Seven (G7) nations came together to stem steep appreciation in the yen. The plan worked, with the Japanese currency coming off a record high versus traditional rival dollar. On the flip side, oil prices climbed again after the UN Security Council ordered a 'no-fly-zone' over Libya and allowed military action to protect the civilians.

Coming back to Japan, local authorities and Tokyo Electric Power Co. struggled throughout the week to stabilise the quake-damaged Fukushima Daiichi nuclear power plant. The atomic plant was hit by fresh explosions and fire early in the week even as the Japanese Prime Minister warned of substantial radiation. Authorities evacuated people from the close vicinity and asked others to take precautions.

The US and Europe raised alarm over radiation risks from the Fukushima plant and several nations asked citizens to leave Japan. But, that didn't deter the Japanese from persisting with efforts to cool down nuclear reactors. Military helicopters were employed to shower sea water on to the overheated reactors. Armed forces and firefighters also joined in the exercise of spraying water by using dozens of fire engines.

Tokyo Electric Power Co. said it may finish reconnecting a power line to the No. 2 reactor. Restoration of power would help restart pumps needed to pour cooling water on overheating fuel rods. If indeed, the operator is successful in lighting up the reactors, the damage to the reactors will be contained and risk of a meltdown will certainly reduce. That will definitely be music to the ears of the global markets.

The Indian markets showed resilience in the initial part of the week compared to their global counterparts. However, the key Indian stock indices underperformed in the last two days of the week as concerns of further monetary tightening escalated after the RBI raised interest rates for the eighth time in 12 months and raised its inflation estimate for FY11. Bad news on RIL with regard to its crown jewel asset - KG-D6 block added to the jitters. The company has clarified on the issue but it remains to be seen how the market reacts to the same. Also, FIIs have been big sellers in the past couple of days. This may add to the misery.