The Supreme Court in a recent verdict asked the Sahara Group to repay 24,400 crore to investors with interest in the next three months.
The Sahara Group claims that it can do so without any problems.Now the question is from where the money will come from?
The answer can have an impact on various markets:
1.If the money comes from abroad/external borrowings (most likely imho) then it will play a role in supporting the rupee in the currency markets.
2.If Sahara had kept the investors money in the domestic banking sector, then the sucking of the same will cause the domestic liquidity situation to go haywire, depressing the stock markets and impacting the debt markets
3.Sahara has huge land holdings.Selling off the same will involve distressed prices which will impact the realty market adversely.
On the other hand, if Sahara defaults, then millions of small investors (or a handful of politicians?) will be left stricken.
Either way, the markets seems to be taking a very benign attitude towards Sahara’s travails.Perhaps its forgetting what Rajiv Gandhi once said “When a giant tree falls, the earth below shakes”