)
Developments related to Greece, as well as the rest of euro zone, had limited impact on Indian equities on Monday, with two shares gaining for every one that declined.
Taking cue from the resilience of other global markets, India’s benchmark indices were up about 0.5 per cent, after an initial decline. Falling crude oil prices were also seen as a positive for India, experts said. Brent crude oil prices fell below $60/barrel on Monday, down about two per cent.
On Sunday, Greece had voted to reject the terms of a bailout package that would have required the country to take additional austerity measures. This has led to concern the country might exit the euro zone, destabilising the region.
However, Indian markets remained largely unfazed, despite a choppy first half, which saw the BSE Sensex shed about 300 points. Subsequently, the index climbed closed at 28,208, up 116 points, or 0.4 per cent; the broader National Stock Exchange Nifty closed at 8,522, up 37 points, or 0.4 per cent.
“Globally, the referendum vote had already been largely discounted by markets, which is why we did not see a sharp negative reaction to the vote. The response of global markets assured Indian markets, which also did not see much of a decline,” said Gautam Chhaochharia, head of research, UBS.
During the second half of the trading session, the markets started recovering, led by buying in the health care and oil & gas sectors due to a decline in crude oil prices. Three of the top five stocks in the Sensex were from the health care sector —Dr Reddys and Cipla were up 3.6 per cent and 3.4 per cent, respectively, while Lupin rose one per cent.
Global markets seemed to price in a limited impact of the Greek crisis, though some risk-off behaviour was seen. “While Greece-related risks will play out further and a Grexit would not set a good precedent, as other countries could also follow, the probability of Greece causing a major crisis in Europe and threatening the global economy and financial markets appears to be low,” said Shane Oliver, head of investment strategy and chief economist, AMP Capital.
European shares were down about a per cent, while Chinese and Japanese stocks declined two per cent and three per cent, respectively. American markets were also down 0.5 per cent in early trade on Monday.
“As the Greece saga drags on, investment markets will likely get used to it, as they have with the Ukraine conflict since early last year,” Oliver said.
The rupee, as well as bonds, also remained unaffected by Greece’s refusal to accept the bailout terms. On Monday, the rupee ended at a near two-month high of 63.40/dollar, against its previous close of 63.44/dollar, after a weak opening.
“Greece is a relatively small economy. Even if it goes out of the euro zone, it will be good for the euro and the rupee because that way, investors will not go after the safe-haven dollar. Today’s initial weakness was the result of a knee-jerk reaction,” said Pramit Brahmbhatt, chief executive of Veracity Group. He added for the rest of the month, the rupee could trade at 63.20-64.20 a dollar.
The yield on the 10-year benchmark bond touched a two-month high of 7.94 per cent, compared with Friday’s close of 7.98 per cent. “There is not much (economic) interconnectedness with Greece. Besides, our macroeconomic fundamentals are very strong. In the bond market, there is talk the FII (foreign institutional investment) limit in government debt might be set in rupee terms and that is helping the market,” said N S Venkatesh, executive director and head of treasury, IDBI Bank.
On Monday, foreign investors were net-buyers of Indian equities by Rs 149 crore, while domestic institutions were net-sellers by Rs 409 crore, according to provisional exchange data.
