Stock markets may take a tumble in case Greece votes against investor hopes, feel analysts

MUMBAI: The stock market's strength in the last few days has left very little room for disappointment if the outcome of the Greek referendum on Sunday is against market expectations. India's stock market indices have gained 1.6% in the last four days on expectation that Greece's voters would opt for austerity and fiscal prudence by the government in the ballot. Analysts said if the vote results belie investor hopes, benchmark indices could fall over 3% early next week. The absence of sizeable short positions offers limited cushion to the market in case of a decline.

"If there is 'no' vote from Greece, then there would be knee jerk reactions across the globe. Indian markets may absorb most of the negative news and Nifty may take support at 8200 levels," said Yogesh Radke, head of quantitative research at Edelweiss Capital.


Indian markets have rallied to 2-1/2 month high on Friday, posting their third consecutive weekly gain. Earlier this week, markets tumbled on worries that Greece would default on its loan repayments to the International Monetary Fund. Though the country defaulted on its IMF loan in line with expectations, the Greek government's decision to call for a referendum on whether to accept its other lenders' demands kept investor hopes alive.

"If there is disappointment from Greece, Nifty can drop to 8200 levels." said Dharmesh Shah, head, technical at ICICI Direct.

India VIX, the volatility index, rose 4.8% to 16.30 on Friday, suggesting some uneasiness among market participants ahead of the Sunday vote.

News reports suggest supporters of Greece's bailout terms have taken a wafer-thin lead of about 45% over the "no" vote of 43%, before a referendum on Sunday that may determine the country's future in the euro zone, with 12% saying they are still undecided.

"There will be volatility in markets if there is a ‘no' vote but that won't be material because currently the European Union is running a huge quantitative easing programme which would give support to global markets," said Gopal Agarwal, chief investment officer at Mirae Asset Global Investments.

Foreign institutional investors (FIIs) bought stocks worth .`356 crore on Friday. However, domestic institutional investors (DIIs) turned sellers worth .`220 crore. Fund managers and analysts expect benchmark indices to rally up to 4% in case the Greek voters go with the lenders' proposals.

"If things remain positive, we expect Nifty to extend its rally to 8850 level," said Shah.

"The index may scale higher to 8600 levels if there is a positive vote by Greece. FIIs are staying long in these markets which is a positive news. I would advise one should buy at lower levels," said Radke.