Goldman issue to have limited impact on markets: Analysts

The domestic market is unlikely to be heavily impacted by the American market watchdog's latest tirade against the Wall Street giant Goldman Sachs, say analysts.

"The Goldman Sachs issue is not going to affect the domestic markets in big way, as investors are upbeat ahead of corporate earnings. A correction, however, on concerns of the Goldman Sachs law suit, cannot be ruled out," Geojit BNP Paribas Financial Services Research Head Alex Mathews told PTI.

Last Friday, the US market regulator the Securities and Exchange Commission charged the investment banking major Goldman Sachs with fraud and causing over $1 billion loss to investors by misrepresenting facts about a financial product tied to sub-prime mortgages, which caused the fall of the Wall Street titans and the global financial meltdown that began in September 2008.

The Goldman Sachs news rattled the Wall Street as well as the European stock markets on Friday. The Goldman Sachs counter plunged 12 per cent on the New York Stock Exchange on Friday following the SEC charges.

Marketmen have mixed views on the magnitude of the impact on the domestic markets due to the charges on Goldman Sachs. "The market is likely to start the week on a weak note. It will then look at global cues for direction and is expected to move sideways from there on," CNI Research Chairman and Managing Director Kishor P Ostwal said.

"Globally, the financial markets are associated with each other and any bad news in the US would certainly have a chain reaction across the world, including the domestic stock markets. The Goldman Sachs suit is a big event and a reaction is awaited from the domestic markets," SMC Capital's Equity Head Jagannadham Thunuguntla told PTI.

Stocks having investment from Goldman Sachs are likely to see selling pressure in the coming sessions, analysts said. "Goldman Sachs has a lot of exposure in the domestic market and the defrauding charge on the financial major would have some impact on its portfolio," Thunuguntla added.

Analysts, however, ruled out that this development would have a negative impact on the foreign institutional investors activity in the domestic market. "The FIIs are bullish on emerging markets like India and they will keep investing in such markets. Capital inflows from overseas fund houses will continue in coming period," said an analyst at a brokerage house.

According to American SEC, charges against Goldman Sachs have been made for "defrauding investors by misstating and omitting key facts about a financial product tied to sub-prime mortgages as the US housing market was beginning to falter".

Sub-prime mortgages, where chances of defaults are high, were one of primary causes for the global financial crisis.

Over the weekend, the Dow Jones declined 126 points or 1.13 per cent to close at 11,018.66 and S&P 500 ended down by 1.61 per cent to 1,192.13, while Nasdaq dropped 1.37 per cent.

European markets too reacted sharply, with Britain's FTSE 100 falling 1.39 per cent and France's CAC 40 declining nearly 2 per cent.