Dalal Street hopes could be dashed: Exit polls show 'No' votes having upper hand in Greece

MUMBAI: Die-hard Dalal Street participants usually spend their Sundays planning for the next day’s trading ideas. But, this Sunday was different for many of them. The uncertainty over the Greek referendum—the outcome of which will determine the market moves on Monday-- made it difficult for them to devise their trading strategies. Though the recent strength in stocks indicated majority of the investors expected voters in Greece to opt for its lenders’ bailout terms, very few were willing to back their conviction with trading bets. And, rightly so.

The exit poll soon after the ballot that ended late on Sunday suggested Greek citizens who voted for a ‘No’—a rejection of the unpopular diktats from other eurozone nations and international creditors in return for more aid-- had just a slight upper hand. Investors and traders in India got to know of the final results early on Monday.

Brokers and analysts said the market could open with a ‘gap up’ or a ‘gap down’ depending on the outcome. The extent of fall or rise, however, would depend on the other Asian markets, which will open before India. If the final ballot results show that Greek voters have opted for a ‘No’, India’s benchmark indices could open 2% lower. Brokers are hoping that the damage could be minimal in the absence of aggressive positions built on borrowed money. If the outcome is a ‘Yes’—accepting the demand of creditors--, the stock gauges could jump 2%, they said.

Global investors are worried about the extent of damage that a ‘No’ vote can have on financial markets as there are no precedents to rely on. One situation could be Greek banks will be choked of liquidity and could see a run as the European Central Bank (ECB) may stop providing loans, a situation that could lead to their insolvency and push the country towards bankruptcy. Investors are fretting that such a condition would have a ripple effect on other banks in the region.

Markets are pinning hopes on the ECB, which is expected to minimize to collateral damage in the eurozone. Optimists are hoping that the central bank would pump more money into the region’s economy to assuage the bond markets—the first to see the impact of the ballot results.

Investors will closely watch the yields on other larger debt laden countries such as Spain, Italy and Portugal on Monday as short-sellers are expected to pounce on these securities if the ballot outcome is a no.