Mumbai: Will the tragic earthquake in Japan impact Indian equities in any way? At first blush, it seems unlikely, except for the sentiment.
Equity markets typically exhibit a knee-jerk reaction after any such catastrophic event. Friday was no different. Equities around the world sank including in India where stocks shed 0.84%.
But over the longer term, three questions need to be asked.
1) Will fund flows be diverted to India? The answer is probably no. Japan, after all is a developed country while Indian is an emerging market. So, unless there is a categorical shift in investor preferences, there is unlikely to be any surge in fund inflows
2) Are Indian companies an alternative sources for Japanese origin exports? Again, the answer is probably no. Japan exports cars (not only small one!), hi-tech equipment, and appliances. Not exactly India’s core strength apart from one or two companies
3) Will Indian companies benefit from a Japanese reconstruction programme? Ditto. Japan has enough of raw materials. Transportation costs are prohibitive.
So, fundamentally, it seems that there is no impact. Mint columnist V. Anantha Nageswaran says that it may be nothing more than giving people an opportunity to take money off the table, which they were doing in any case.
Adrian Mowat, managing director and strategist at JP Morgan Chase & Co feels the same in this interview to television channel ET Now. Read interview-