Investors worry about another attack after Mumbai

India and Pakistan, which have fought three wars, initiated the biggest military build-up on their border in 2001 after an attack on the Indian parliament that New Delhi blamed on Pakistan-based guerrilla groups.

But it was another attack on an Indian army camp in Kashmir five months later that raised real fears the two nations may be on the brink of war. Some embassies advised their citizens to evacuate New Delhi. A flurry of diplomatic peace missions led by the United States eased the situation.

Indian markets have a mixed record of responding to attacks. In the limited three-month Kargill conflict with Pakistan in 1999, the main stock index actually rose -- by a third.

In 2001, stocks fell 8 percent in the two tense weeks after the parliament raid but recovered losses in the next fortnight.

After the 2002 army camp raid, stocks, already hit by uncertainty sparked by huge religious riots in Gujarat state, lost a tenth of their value in the following eight days and did not recover for the rest of the year until tensions began easing.

Seven years on from that, investors are drawn to India's near 7-percent economic growth and promise of stability after the Congress party-led government won re-election in May.

"The risk perception has certainly deteriorated. This, however, hasn't deterred investors from participating in, and benefiting from, the India opportunity," said Manoj Vohra, head of the Economist Intelligence Unit in India.

Investors simply have to get used to the new reality, Kevan Watts, country head of Bank of America-Merrill Lynch, told the Reuters Summit.

"It is the reality all across the world. So you put your business continuity plan in place, you put up as much physical security as you can, and you just get on with your business."