As the deadline for the first payment tranche ends today, global markets are in a state of flux. Fears of Greek exit from the EU and uncertainty about the outcome of the referendum that the Greek Govt has decided to hold on July 5 has resulted in wide spread risk aversion and flight to safety across global markets. From Japan to US, the risk of contagion and the strategies to preserve profit or rather limit losses seems to be high on every investor’s trading agenda currently? But how will a potential Grexit or continuation of uncertainty about Greece’s future impact emerging markets like India?
The good news is most expert feel the impact will be limited and nowhere close to 2008 Lehman mayhem that an average retail investor is scared of. Given the current pace of growth, the market movement and the rupee’s performance vis a vis the dollar and euro, most market watchers feel that a major part of the negatives have already been factored in by the market. That though does not rule out a knee jerk reaction in the immediate future or a near-term reflection of global market movement once the referendum outcome is out. Broadly however the market is seen continuing in a ranged narrow spectrum with domestic factors contributing towards the next gain or upmove in markets whenever it happens.
Currently most market watchers are looking out for the duration and extent of the sell off whenever the final news is out. Central Banks around the world like ECB and the Bank Of Japan are already in the process if conducting large scale easing programs to bolster recovery and these measures can go a long way in limiting the risk of a potential contagion. The Reserve Bank of India currently has a stockpile close to $355 billion.
Though it would be totally naïve and out of place to think that India will remain unscarred in the event of a Greek Exit, one can safely assume that the aftermath will nowhere be close to the gory and devastating fall seen in 2008 after the Lehman Crisis.