In June the Indian markets were worried about the impact of a delay in the monsoon, but when it arrived in July, its impact was unprecedented. Mumbai, the financial capital, was inundated with 36 inches of rain in just one day, the highest-ever rainfall in recorded history, and several surrounding districts across the two states of Maharashtra and Gujarat were also badly hit. These states are major producers of cotton, oilseeds, sugar and various agricultural commodities, which have been heavily compromised. There will be implications for GDP growth since agriculture contributes 25% to GDP.
Flooding killed at least 1,000 people in the city and caused landslides, large-scale destruction of housing and businesses, and severe disruption in communication. Indias two biggest stock exchanges and a number of commodity and bullion markets based in Mumbai were forced to close during the deluge. Power failures and failed Internet and telecom connectivity hurt the call-center industrys operations.
Despite the destruction caused by the monsoon, equity indexes are at a new high thanks to strong and sustained foreign investment flows. The BSE Sensitive index hit a new all-time high of 7,500 in July, and foreign investment into Indian capital markets in July alone reached $1.8 billion, pushing the total for the year so far to $6.5 billion. Indian companies are also ramping up their international investments. VSNL, Indias largest international long-distance telecom company, purchased Canadian telecom company Teleglobe International Holdings in a $239 million all-cash deal in the last week of July. Teleglobe operates a network in the United States and Canada along with a global network of subsea, landline and satellite facilities. VSNL had earlier taken over the submarine cable licenses and the fiber optic networks of two Tyco International subsidiaries for $130 million.