In any case, the Greece fever will peak on June 17, when election outcome will be known. If anti bailout parties form a government, then the diagnosis to the Greek problems becomes difficult and almost impossible.
This leaves the world gazing at the prospect of Greece leaving the eurozone. If that happens, would it be catastrophic for India? Here are a few ways the Greexit could impact India.
Negligible trade figures
India has almost negligible trade with Greece. In fact, our exports to Greece is hardly 0.5% of total exports, while the imports is even lesser. This means that trade figures are not likely to get impacted to a great extent, in the event of Greece leaving the eurozone. Indian companies too have almost no exposure to Greece. Very safe on this count, as European Banks have huge exposure to Greece and some of them are likely to be hurt badly, should there be a disorderly default from Greece.
A big worry for equity investors
The big worry of course is for equity investors. If Greece exits the eurozone and it is disorderly, it can have serious repercussions to Indian equities. Like all economic crisis, a herd mentality sets in, where there is ferocious selling, causing stocks to plunge, especially as foreign institutional investors start unwinding. A contagion effect in Europe will spark a sell off in equities across the globe and India as well. Erosion of investor wealth is almost a given.
The rupee likely to fall
The huge selling pressure from foreign funds is likely to see demand for the dollar, which is likely to play on the rupee. In variably, falling equities would lead to a fall in the rupee. Already, the rupee is fragile and has shown signs of vulnerability this year. A Greece exit and subsequent foreign fund selling is likely to see a vertical drop in the rupee.
Imports likely to get costlier
With the rupee falling imports are likely to get costlier for India and this could possibly stoke inflation.
Crude oil drop - a big bonanza
India, which meets 70% of its crude requirements through imports is likely to benefit by way of fall in crude prices, which is almost certain if Greece leaves the eurozone. However, falling crude prices may be off set by a falling rupee, resulting in the result being a "zero sum" game.
Clearly, it's unpredictable at the moment, which way Greece is headed. If there is a Greexit, the real worry could be an exodus of foreign funds from equities and a virtual collapse of the stock markets and investor wealth. And this will have a cascading effect on the rupee. Beyond that as far as trade and company/bank exposures to Greece is concerned, there is unlikely to be a collateral damage.