Chief Economic Advisor Arvind Subramanian is unfazed by the Greek crisis, saying the country is well insulated.
“This is a drama which is going to play out for some time. We are well protected in at least three ways. Our macro-economic situation is much more stable. We have reserves. We are an economy which is still a very attractive investment destination. So I think we are relatively well insulated. As for the crisis itself, it is going to be long and prolonged,” Subramanian told reporters here.
A day after Greeks voted overwhelmingly against accepting the cash-for-reforms proposal of the ‘troika’ of creditors — the International Monetary Fund, the European Central Bank and the European Commission — the country’s Finance Minister Yanis Varoufakis resigned to allow the government to negotiate better with German and French leaders to determine further actions regarding the debt-ridden country.
Even as bourses in Europe and Asia tended to dip reacting to the Greece uncertainty, Indian markets bounced back smartly after opening one per cent down. Not only did they cover the loss but also ended up with gains.
However, the rupee closed weaker at ₹63.40 against the dollar, a loss of 4 paise over the previous closing.
As Subramanian said, in these situations “what mostly happens is there is flight to dollar, to a safe haven. The rupee might also be affected by that. But nothing unusual has happened, so far.”
As the crisis plays out “financial markets are going to be volatile. Both the ECB and Fed will take this into account,” Subramanian added.
The Government is closely monitoring the situation, said Finance Secretary Rajiv Mehrishi, adding, “We will have to see how the euro moves now. There could be some reaction on the likely Fed rate hike.”
Markets shrug off effect After being in the red for most part of the trading session on Monday on fears of Greece effect on other EU countries’, the Nifty and the Sensex recovered to close in the green.
The Nifty closed 37 points up at 8,522 while the Sensex closed 116 points up at 28,209.
Devang Mehta, Senior VP & Head – Equity Advisory, Anand Rathi Financial Services, said: “We have been quite vocal about market presenting a buying opportunity whenever any adverse news from Greece flows in. We are more or less insulated from the proceedings in Greece with strong foreign exchange reserves, improving macros & crude again heading southwards….
“For our markets, the Q1 earnings season, progress of the monsoon and the monsoon session of Parliament are likely to be key triggers. Rising equity allocation in domestic savings is also supporting the equity market.”
Foreign Institutional Investors bought net equities worth ₹149 crore while Domestic Institutional Investors offloaded net equities worth ₹410 crore. Retail investors on the BSE also sold net equities worth ₹29 crore.
All sectoral indices barring CNX Metals closed in the green while volatility was down 1.76 per cent and the volatility index India Vix closed at 16.0175.