Markets to focus on domestic events post Greek referendum: analysts

Progress of monsoon and the monsoon session of Parliament are some of the variables that will impact market sentiment going ahead, analysts say

Global equity markets reacted to developments in Greece that voted against a bailout package by its creditors – a move that could trigger the country’s exit from the euro zone. The final result in the referendum, reports suggest, was 61.3 per cent “No” against 38.7 per cent “Yes”.

Most Asian markets reacted to the development, with Jakarta Composite, KOSPI, Taiwan Weighted, Hang Seng, and the Nikkei slipping 1.1 per cent - 3.3 per cent on Monday. The Indian benchmarks, the S&P BSE Sensex and the CNX Nifty, that lost over one per cent intra-day trade, however, recovered to end nearly 0.5 per cent higher at 28,208 and 8,522, respectively.

 

“I think what had happened in the early trades on Monday was due to a section of the market that overreacted to the Greece vote; later in the day they would have realised the minimal impact and that is how we saw the recovery,” said Nirmal Jain, chairman, IIFL Group.

Despite the referendum outcome, lenders might make little compromise on their pre-conditions or they might allow Greece eventually to exit, experts say. The immediate outcome, however, would be  pain for Greece banks, as they would find it difficult to get financial support on a day-to-day basis.

Vaibhav Sanghavi, managing director, Ambit Investment Advisors, says: “We usually don’t take a call on the markets ahead of such big political developments, which have a tendency to surprise the markets both ways. Having said that, I believe that the outcome opens up a canvas of possibilities in terms of further negotiations between Greece and the European Union (EU), including the possibility of ‘Grexit’.”

Outlook
So, what is the road ahead for the Indian markets from here  and what are the key variables to keep a tab on?

Experts suggest domestic factors rather than the Greece crisis would determine the course of the Indian equities. While an impact on account of Greece is expected to be short-lived, the markets would closely monitor the developments as regards a hike in interest rates by the US Federal Reserve (US Fed), they add.

Samir Arora, founder and fund manager, Helios Capital, suggests in case there is a panic in the global markets going ahead, then everyone, including India, will get impacted.

“But hopefully, all this will be defined by one’s proximity to the euro zone and the problems with Greece. India does not have a direct relation, except for the fact that we are a part of the global financial system,” he says.

Sanghavi of Ambit cautions against market volatility that could last at least a couple of months. On the domestic front, he suggests the coming earnings season, progress of monsoon and the coming session of Parliament are some of the variables that will impact market sentiment.

Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India), says, “The developments in Greece will have a short-term impact on the markets and will not change much for the Indian markets from a medium-term perspective. I believe  the Indian economy is on the road to recovery. A lot now depends on the progress of the monsoon and the government being able to push through reforms like the GST Bill, etc. Things on the ground are starting to improve.”

“I feel that the downside for the markets seems to be protected right now and the upside will depend on some of the above-mentioned catalysts playing out. I still maintain a December-end target of 9,600 for the Nifty,” he adds.

On foreign institutional investor's (FII) inflows, G.Chokkalingam, founder & managing director, Equinomics Research & Advisory, says the relative stability of Indian capital markets and expectation of faster GDP (gross domestic product) growth over next two years would lead to a tilt towards more FII inflows into the country as compared to China.