Dalal St seen fretting on Japan aftershocks; markets may get edgy

MUMBAI: It could be an edgy weekend for traders and investors as the Japan quake cast a shadow on the market and a tsunami threat engulfed the US west coast. The devastation in Japan is likely to be far lesser than what it suffered in the ?95 Kobe earthquake, but aerial photos of the catastrophe flashed across television screens sent jitters across financial markets, already rattled by a boiling oil and sluggish US growth.

Analysts said tsunami warnings for other Asian countries could hold back investors from buying stocks in the continent, which has already seen a flight of foreign money in 2011. ?It may add to the risk aversion already affecting many emerging markets, including India,? said V Anantha Nageswaran, head-investment research for Asia-Pacific of Bank Julius Baer.

Benchmark indices of Asian stocks fell on Friday, with Japan?s stock gauges dropping 1-2% on fears the earthquake would further strain the finances of the world?s third-largest economy. The Sensex fell 153.89 points, or 0.84%, to 18,174. Most Asian markets were already weak after China?s monthly inflation data exceeded expectations, raising fears of further monetary tightening in the country.

Unless the US and other countries in Asia are hit by tsunami, the Japan quake is unlikely to have a lasting effect on Indian stocks. But there may be other impacts. ?Japan has substantial infrastructure funding commitment in India. One needs to watch out whether that will slow down,? said Anand Tandon, CEO of JRG Securities .

A few other brokerages felt incremental inflow from Japanese investors may come down in the short run. ?Oil and US job growth will remain the big worries, but there will be movements in specific stocks having business relations with Japan ,? said a trader.

Currency dealers in India as well as abroad will closely track the market in the next few days. The rupee slipped six paise on Friday to close at 45.24/25 against the US dollar on sustained dollar demand from importers and sluggish equities. But the Japanese yen?s sharp rebound against the dollar to end with gains despite the calamity surprised many in the market.