Most Asian markets
have given a muted response to North Korea
firing another ballistic missile over Japan on Friday. While the Nikkei 225 and Hang Seng indices posted modest gains – up 0.3% - 0.5%, Straits Times, Kospi and the Shanghai Composite slipped up to 0.3%. Back home, the S&P BSE Sensex
and the Nifty50 were also trading lower by around 0.2% each.
Markets, analysts say, have given such a response to the development as they rule out a full-fledged war. Christopher Wood, managing director and equity strategist at CLSA, for instance, believes the United States (US) will, sooner or later, likely have to accept the reality that North Korea
has become a nuclear power and adjust its policy accordingly towards a focus on containment.
Going ahead, most analysts feel that the threat to stability for the Indian equity markets
is mostly from the global geopolitical situation that can see the markets
perform in tandem with peers. That said, the reaction, however, they feel will be short-lived and investors should use any decline to buy stocks from a medium-to-long term perspective.
"In case there is a geopolitical event, India will be seen as a relative safe haven within the Asian region, says Sandeep Bhatia, managing director and head, Macquarie
“No one wants war and the markets, too, are ruling out the possibility at this stage. These developments have been going on since the past few weeks and the situation will take a few more weeks to get sorted. There are other moving parts / variables that need to be taken into account for the markets
to chalk out their future trajectory. I suggest investors stock with quality large-cap names. As a portfolio strategy, they would be better off keeping around 30% in cash and around 50% deployed in good large-cap names,” Chokkalingam advises.
Despite a near 20% rise in the markets
in calendar year 2017 (CY17), Credit Suisse
remains optimistic on the road ahead and sees no major downside, unless global cues disappoint. In its 'India Market Strategy' report released Wednesday, the global research and brokerage house expects domestic flows to remain robust thanks to improvement in financial savings and support the market on every correction.
On a more macro view, Credit Suisse
remains concerned on the muted economic growth - as reflected by the drop in demand for oil, cement, power and truck rentals. It also believes the impact of the goods and services tax (GST) on tax collection and overall economy is still unknown. CLICK HERE FOR THE FULL REPORT