Greece exit (or famously known as Grexit) from Europe will not have any major impact on Indian equities, though foreign capital flows into the domestic markets could slow down due to volatility, feel marketmen. Greek citizens on Sunday voted in favour of not accepting further austerity measures from its creditors. Analysts are of the opinion that the Greece crisis was somewhat priced into the markets.

‘Not a big event’

Murthy Nagarajan, Head — Fixed Income, Quantum AMC, said, “The failure of Greece is not such a big event for our economy, as most of its debt is owned by governments of other countries.

“The European Central Bank has ring-fenced other EU countries by stating it would buy the bonds of EU countries. In the Indian context, the effect is not expected to be high as the exposure is very low. The Greece issue would, however, increase risk aversion towards emerging markets, which would affect capital flows to our markets on a temporary basis.”

Some market players felt that domestic equities would be impacted more by local factors such as government spending.

Devang Mehta, Senior Vice-President and Head — Equity Advisory, Anand Rathi Financial Services, said: “We have been quite vocal about the 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 and crude oil again heading southwards.”

For our markets, the Q1 earnings season, progress of the monsoon and monsoon session of Parliament are likely to be key triggers. Rising equity allocation in domestic savings is also supporting the equity market, he added.

More room for growth

Vinod Nair, Head — Fundamental Research, Geojit BNP Paribas Financial Services, said, “The likely increase in government spending, possible rate cut and fair numbers for Q1 of current fiscal are providing hope for Indian markets.” However, there would be pressure on the rupee and higher volatility would have a bearing on FII flows, felt some.

Suvodeep Rakshit of Kotak Institutional Equities said in a report: “A global risk-off will affect emerging markets, with India being no exception. Even with negligible direct exposure to Greece, contagion risks in the Euro Zone will imply pressure on the Indian rupee and higher volatility, with risk on capital inflows.

“We expect RBI to use both the forward (about $7.5 billion of bet long positions over the next three months) and the spot market (over $350 billion of forex reserves) to manage the pressures on INR. Even without a Greek exit, we expect significant global volatility and pressure in the fixed income and currency markets over the next few days/weeks.”

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