Following the withdrawal of Greece from the negotiations on Friday, the stock markets globally opened week on Monday with the Euro sliding 2% as a result.
It seems India Inc might not be completely shielded from the Greece turmoil after all with borrowing costs may witnessing a spike.
The economic fallout of the Greece crisis might increase cost of money which could mean that Indian companies looking for loans in foreign currency might have to settle for a higher interest rates.
Following the withdrawal of Greece from the negotiations on Friday, the stock markets globally opened week on Monday with the Euro sliding 2% as a result.
Devendra Kumar Pant, chief economist, India Ratings and Diana Monteiro, said, "Although Indian companies have limited direct exposure to Greece, they may feel some pain in the short term since a slew of them have been tapping international markets for cheaper funding relative to home country."
Indian companies raised foreign capital of $13.4 billion last year.
Moreover, the volatility in the international market because of the Greece debt crisis may result in some amount of capital flight from India putting pressure on the value of rupee.
The two said, Euro may weaken against the US dollar while the US dollar index strengthens further and general emerging market currencies go weak. Indian rupee is likely to track the interplay between US dollar strength and commodity price fall."
Greece is a small part of the GDP of Eurozone and India's trade with the country is only $500 million. However, a contagion effect is feared which may increase volatility and capital flight.
This is the biggest event that has spooked global markets since the subprime crisis that originated in the US in 2008 which led to the bankruptcy of Lehman Brothers.
The biggest single-day debt outflow from the Indian market was $2 billion on 17 September 2008, post Lehman’s collapse," the ratings agency said, adding, "Contagion risks however are restricted this time due to the low privately held and overseas debt in Greece."
They said, "Presently, the macro fundamentals are in much better shape than in mid-2013 with current account deficit as a % of GDP in FY15 at 1.3% (FY13; 4.7%) and fiscal deficit at 4.1% (4.9%). This along with forex reserves will cushion the fallout impact. Any upheaval in the short-run will gradually settle down."
India has foreign exchange reserves of nearly $355 billion, an all time high with export cover of nearly 10 months.
The pain for India Inc, although, will only be a short-term phenomenon.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}