Greece crisis is a good opportunity to buy stocks: analysts

Major global indices like CAC 40, DAX Shanghai Composite, Hang Seng, Nikkei, Straits Times, Sensex, Nifty have lost 1% - 10% in a week

Global equity markets have been dragged lower over the past few sessions, as the crisis in Greece escalated with creditors refusing to extend the country’s bailout beyond the June 30 deadline. According to reports, Greece on Tuesday refused to pay a euro 1.6-billion debt instalment to the International Monetary Fund (IMF) due June 30.

In the past week, major global indices such as CAC 40, DAX in Europe; Shanghai Composite, Hang Seng, Nikkei, Taiwan Weighted and Straits Times Index have lost ground due to worries over Greece.

Indian markets, too, have seen an increase in volatility over the past five trading sessions (from June 23) with the India VIX, a gauge of market volatility, rising 26 per cent to a high of 18.7750 on June 29. The markets, in this backdrop, had lost nearly one per cent with the CNX Nifty slipping to 8,318 levels on Monday. However, the index settled 0.6 per cent higher on Tuesday at 8,368 levels.

Meanwhile, Greek Prime Minister Alexis Tsipras has called a referendum on July 5 to ask the citizens whether the terms of the creditors' offer should be accepted. Rating agency Standard & Poor's (S&P) also downgraded the country's credit rating, saying the government's decision to hold a referendum brought it closer to a default.

Investing strategy

This uncertainty has thrown up many questions: are the markets likely to drift lower and what should your stock strategy be? Should you buy, sell, or stay invested?

Unlike in 2011-12, the Greek drama has now been unfolding for several years. So now, it is much less of a surprise to financial markets, experts say.

"Benefiting from the sharp decline in oil prices over the past year, Asia ex-Japan's fundamental vulnerability indicators have improved, which suggest that within the EM (emerging markets) universe, Asia is least exposed to financial contagion," points out a recent Global Markets Research report from Nomura.

Hitesh Agrawal, head of research at Reliance Securities, expects markets to remain volatile in the near-term, until some breakthrough is arrived at on Greece's bailout. The Nifty, he says, is likely to trade in the 8,000-8,400 range.

"Compulsions and common interest of Greece and European Union will ensure there will be many swings in the saga, keeping German and Swiss bonds in demand, Euro under pressure and global equity markets volatile. Certain stocks in information technology (IT), pharmaceuticals and auto ancillaries having significant exposure to euro will underperform the market. Since Greece issue is well known for some time, it is unlikely to cause as much correction as the 2008 global crisis," says Nilesh Shah, managing director, Kotak Mahindra Asset Management.

Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India), also suggests the impasse in Greece is a good opportunity to buy into the market as it consolidates before the next leg-up.

Nirav Sheth of Edelweiss, in a co-authored report with Santosh Hiredesai and Prateek Parekh, says: "For India, large global shocks are transmitted via the balance of payments channel. Reversal in capital flows amid risk aversion puts downward pressure on the rupee, which in turn, delays monetary easing and impacts business confidence. We believe the Greece crisis is unlikely to trigger this reflexive chain reaction."

"Outside this, we continue to expect growth indicators to improve in H2FY16 anchored by higher government spending and higher real incomes. We hold our March-end Sensex target of 32700, even while conceding that markets are likely to hold their trading range of about 26,000-28,000 in the near months," they add.