Greece Fallout: Expect Volatile Markets In Short Term

<p>Even as pundits say that the Greece crisis is unlikely to have any major impact on India in the long run since the two countries' trade volume is relatively low, stock markets are expected to remain volatile in the short term.<br><br>Sensex opened in red in the morning trade on Monday (6 July) and plunged over 200 points after Greece voted against the bailout terms set by its creditors. However, as the day progressed, it bounced back to close at 28,208.76, up 115.97 points or 0.41 per cent, while Nifty rose 37.25 points to close at 8,522.15, in the backdrop of most sectors witnessing renewed buying interest at lower levels.<br><br>“Like other global markets, the initial reaction to Greece voting, where they rejected conditions of a rescue package from creditors on Sunday, was negative on domestic front,” said Jayant Manglik, President, Retail Distribution at Religare Securities. Besides, depreciation in Indian rupee against dollar was also dampening the markets sentiments, he added. However, noticeable buying interest across the board not only helped index to pare losses but end the day in green as well.<br><br>While the Indian economy is not linked to Greece in any major way, there are certain concerns which are looming large on the bourses. If Greece continues to be a part of Europe and asks for concession on the austerity package or debt write-off, there may be a situation where other nations such as Spain, Portugal and Italy come up with a similar request. Also, on the contrary, if Greece decides to finally move out of Europe, even then markets will doubt the EU's commitment to protect its unity and weak link, said markets experts. “Withdrawal of confidence by the market on EU's commitment can create crisis situation for the weak links of EU,” said Nilesh Shah, MD, Kotak Mutual Fund.<br><br>Going forward, India is likely to be impacted from the flight of safety into Dollarized assets, which in turn may result in some volatility in the omestic equity, debt and the forex market. However, since Indian government is closely monitoring the situation and RBI has increased its forex reserves to around US$ 355 bn, it is likely to provide a strong cushion for any spike in dollar demand, added Shah.<br><br>In the months to come, the factors that will determine market numbers are CPI numbers, quarterly results, progress of monsoons and major bills such as GST, among others.</p>