Highlights

– Targeting of Westerners suggests the possibility of foreign backing
– Economic impact from attacks is likely to be nominal
– Likelihood of a second wave of attacks in the near-term is low

On November 26, 2008, eight coordinated attacks took place in Mumbai, India’s principal financial district. Over 170 people have been reported killed in the attacks thus far and several hundred reported injured. Following the attacks, India’s navy, police and security teams were placed on heightened alert throughout the city. Security forces cordoned off the Trident, Oberoi, and Taj Mahal hotels, as well as the Cama Hospital. Further, Army commandos and 200 National Security Guards (NSG) commandos were sent to Mumbai to assist with securing the area and to facilitate hostage rescue. A nationwide alert was implemented and all airports in the country were put on high-security surveillance following the attacks.

Since the incidents took place, security in New Delhi has also been increased to include airports and all five-star hotels. We expect security forces to continue to quarantine the area in the near-term as investigations continue, limiting the public’s movement throughout the city.

Details of the Attack

A few hours before midnight on November 26, 2008, two five-star hotels and a railway station were targeted by gunmen in what appeared to be a coordinated terrorist attack in the Indian financial capital of Mumbai. According to various reports, investigators believe between ten and twenty men arrived in Mumbai by boat and then split into small groups to attack pre-selected targets. The gunmen proceeded to mount several attacks against various Western interests throughout the city beginning in the southern Colaba district and moving northwards across the city. Mumbai police commissioner A.N. Roy told reporters that at least seven disparate attacks had taken place throughout the city.

The attacks took a significant toll on the city’s top police brass with three high-profile deaths reported to date, including the high-profile chief of the anti-terror squad Hemant Karkare, Mumbai’s commissioner of police Ashok Kamte, and encounter specialist Vijay Salaskar.

The attacks occurred in a number of popular tourists spots and entities often frequented by Western tourists and officials. The following sites were targeted: Mumbai CST Railway station, Oberoi Hotel, Taj Hotel located near Gate of India, Trident Hotel, Café Leopold restaurant in Colaba, a taxi on Dockyard Road in Mazgaon, Cama Hospital and Jewish Cultural Center, Nariman House. The assailants used automatic weapons and grenades to target people indiscriminately and managed to hold a number of individuals hostage in both the Taj and Oberoi Hotels until Indian commandos effectuated rescues at both. Reports indicated that the assailants were specifically looking for people with British and American citizenship. In the near-term, we do not expect further attacks against Western interests in Mumbai. However, the targeting of Western interests constitutes a significant increase in the scale and caliber of such operations and will likely be repeated in the mid to long-term.

Responsible Terrorist Group

At present, the Deccan Mujahideen has claimed responsibility for the attack but it is more likely that the group consists of members of Lashkar-e-Taiba (LeT), one of the largest and most active Islamist militant organizations in the region with camps located in Pakistan-administered Kashmir. More noteworthy, the LeT is considered to be connected with the ISI, Pakistan’s intelligence agency. Additionally, The Times of India is reporting that the Deccan Mujahideen claim of responsibility email has been traced back to Lahore, Pakistan.

It is likely that several members of both LeT and the Indian Mujahideen (IM) may have played a role in the attacks and could be aligning under the new umbrella organization known as Deccan Mujahideen. Also possible, however, is that Deccan is a part of an offshoot of a larger organization already operating within India.

While we do not believe that al Qaeda played a significant role in conducting the attacks, the fact that the actions specifically targeted both British and American individuals suggests that whoever was responsible likely was influenced from abroad, most likely Pakistan.

Market Impact

The attacks against Mumbai are reminiscent of the September 11 attacks in the United States insofar as they targeted India’s financial capital. In the United States, stocks fell a record 7.1 percent when markets reopened six days after the attack. While the Sensex has not faced as severe a decline after reopening on Friday, the country’s primary market indicator is down over 50 percent since January 2008 amid concerns over the growing worldwide financial crisis.

Notably, serial bomb blasts that took place in Mumbai in 1993 – when the stock market building itself was the target – did not lead to any serious selling in the markets, but the attack on Parliament in Delhi in December 2001 had a negative impact on the Sensex. Additionally, despite a series of bomb attacks throughout India, international investors continue to view India as a relatively stable economy with a strong investment prospect. Given how entrenched most foreign companies are in Mumbai, we expect most entities to continue to maintain operations in the city, albeit at a reduced scale.

Outlook

Taking into account a series of recent attacks in Jaipur, New Delhi, and Ahmedabad, the likelihood of a second wave of attacks in the near-term is low. However, we note a recent story in the TimesOnline, which suggests as many as five terrorist gunmen may have evaded capture in Mumbai and may be planning further assaults within the city. We believe that the level of security in Mumbai will remain elevated in the near-term, which will likely limit the probability that the group responsible would carryout any additional waves of attacks in the near-term.

However, due to the recent incidents, it is likely that extremist Hindu groups will use this opportunity to launch reprisal attacks against Muslim communities in the near to mid-term. Further, we note that Islamic extremist groups will likely continue to carry out attacks targeting crowded tourist and financial areas in India in the mid to long-term.