The intensifying debt woes in Europe with its epicentre in Greece, is likely to have a considerable impact on the domestic stock market in the immediate short-term, as foreign investors are likely to exercise caution before parking fresh funds, say analysts.
"The developments in Europe would have some impact on our markets. The NSE index Nifty can be expected to move in the range of 5,100 to 5,300," Bonanza Portfolio assistant vice-president for equity research Avinash Gupta told PTI.
"Global scenario looks bleak with balance-sheets of countries such as Greece, Portugal and Spain coming under pressure. Our market is extremely susceptible to any problem erupting elsewhere and depends on foreign fund flows," SMC Capitals equity head Jagannadham Thunuguntla said.
After a plunging 310 points on Wednesday, the BSE benchmark Sensex rose 123 points today on easing food inflation and overnight gains in the US markets and the early greenshoots from the European markets.
"The market gave a sudden reaction on Wednesday on the Greece debt crisis. We don't think our market will nosedive again, but some correction cannot be ruled out," Unicon Financial chief executive Gajendra Nagpal said.
Purpleline Investment Advisors director and chief executive PK Agarwal echoed similar views and said, "though in short-term the debt crisis is negative for our market as global fund managers have become jittery.
In the long-term, however, India and China would be the only ones left for investors to put their money and get big returns. The Indian growth story would prevail as it's based on massive domestic demand which is real and investor confidence remains strong. According to Sebi data, FIIs pumped Rs 160 crore (Rs 1.6 billion) in domestic equities on Wednesday.
On Tuesday, Standard & Poor's had downgraded Greece and Portugal's long-term ratings leading to major sell-off in most stock markets across the world. "We still believe that a swift policy response can and probably will keep contagion risks to the overall Eurozone economy under control," a Bank of America-Merrill Lynch analyst said in a report.
In another blow to the battered sentiment after the downgrade of Greece and Portugal, on Wednesday night S&P lowered its credit rating on Spain too.
"Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position," S&P stated. Last night, reports said the IMF has signalled it would increase the bailout package for Greece from the promised $45 billion.
