Equity market to remain weak ahead of F&O expiry and Greece crisis

After a 5.5 per cent correction in the past three weeks, the equity market last week in a volatile session gained some ground on bargain hunting at lower levels to gain 3 per cent after concerns receded over US Fed rising rates in the near term.

Surprise from domestic economic data also helped Indian equity market to post positive gains that helps BSE Sensex gain 900 points in one week.

Going ahead lack of trigger will keep Indian equity market subdued. The market is expected to remain weak ahead of the F&O contract expiry on Thursday, June 25, 2015.

More than the domestic factors the market would react to global events, especially development in Greece will be closely watched.

European leaders on Monday, June 22, 2015 are scheduled to hold an emergency summit in Brussels to discuss Greece's bailout program after European officials and the International Monetary Fund (IMF) failed to strike a deal on Greece's bailout program. End of June 2015, Greece has to repay Euro 1.6 billion ($1.82 billion) to IMF.

Greece has a total debt of $324 billion which is hugely held by Europeans and IMF therefore even if Greece default and moves out of the Euro-zone it is unlikely to have a long-term impact on the equity market. But the concerns are of Greece having a contagion effect of others moving out of the Euro-zone.

Going by pure economics the possibility looks high, but politically it looks unlikely. Greece will never be able to repay and the allies will still infuse money into Greece. This is not an economic problem, it's a geopolitical issue.

Hardliners in Europe know that if Greece moves out of the EU it will be more damaging for them than Greece as other allied forces like Russian and Chinese are more than willing to help Greece.

Most likely Greece moving out will not happen as the powerful US and European allies will not allow it to happen. This time if creditors line up to fund Greece than one can be rest assured that Greece exit is unlikely.

This will be good for markets like India as it will keep easy liquidity in the world. Coming back to the Indian market economic recovery will take time, until than the trend in the Indian equity market will be dictated by foreign flows.