NEW DELHI: The domestic equity market recovered smartly after Hurricane Brexit swept the global financial markets last week. Even though the tide has turned, the impact could keep lingering on for a while.On biggest threat looming on India is a potential currency war. Last week, European Central Bank President Mario Draghi warned that the world is at the risk of a currency war after the Brexit vote, as each economy seeks to devalue its money in a bid to boost growth.China has begun it already. The renminbi has fallen over 1 per cent after the Brexit vote as the US dollar index gained some 2 per cent in the same period.In today’s closely knit world, a sneeze in one corner can easily result in a flu in another part of the globe, say experts. Everyone is nervous about the ramifications of this historic event. And rightly so.Reserve Bank of India Governor Raghuram Rajan reiterated his previous call to central banks globally not to depreciate their currencies post Brexit for competitive advantage.The Reserve Bank of India (RBI) said India’s external debt stood at $485.6 billion at the end of March 2016, a rise of $10.6 billion year-on-year (YoY).So how is India placed amid all this gloom and doom? Analysts say India’s relative position with respect to external debt is largely stable. But it may not be right to say that we are completely immune to what is happening around the globe.“We are somewhere in the middle, and maybe, better equipped to deal with what’s coming. That’s because India is not as vulnerable to external risks. At the end of December 2015, India’s external debt stood at $480.2 billion, a 4.7 per cent increase since December 2014,” Kunj Bansal, CIO & ED Centrum Wealth Management, said in a report.This rise was led largely by long-term external debt that accounted for 83 per cent of India’s total external debt, while the share of short-term debt was only 17 per cent. The contribution of short-term debt has come down from 23.6 per cent in 2012-13 to 17 per cent in 2015-16.The currency composition of India’s total external debt shows US dollar-denominated debt accounted for 57.6 per cent as of December 2015 end, down from 63.6 per cent at the end of December 2013. On the other hand, the euro contributed only 2.3 per cent and pound sterling a mere 1 per cent.The share of the rupee component, which includes FII money in G-secs and corporate bonds, masala bonds, NRE and NRO accounts, was 28.7 per cent, up from 19.4 per cent at the end of December 2013.The rupee will stabilise in the long term but is likely to remain volatile with respect to the US dollar in the near term. It is likely to gyrate between 67.65 and 69.30 to the dollar between now and July 27, options expiring next month indicate, ET said in a report.Some analysts even see the Indian currency depreciating to 70 levels and beyond over the next three months. But the Reserve Bank of India says there is sufficient US dollar and rupee liquidity to ensure smooth functioning of the market.“Since June 23, the day before the Brexit vote till now, the rupee is weaker by about 50 paisa. The direct impact of Brexit on the rupee has been very little. From trade terms, our total exports to the UK are about 3.5 per cent of the total,” Phani Shankar, Kotak Mahindra Bank , said in an interview with ET Now.“Our exposure to Europe is about 16.5 per cent, even if that gets impacted. In general, the direct impact on the rupee is not much. The real impact on the rupee is the spillover effect of what is happening in the rest of the world, the turmoil in the financial markets and how much that will spread,” he said.India external debt is in a more comfortable position compared to some of the other countries and the rate of growth in external debt has come down from double digits to mid-single digits, experts point out.Among peers with high external debt China has $960 billion, Mexico $433 billion, Turkey $408 billion, Brazil $557 billion and Malaysia $211 billion.India’s foreign exchange reserves are at a comfortable 65 per cent of total external debt while China’s forex reserve stands at over 400 per cent of its total debt.Bansal said the foreign exchange reserve number is much lower for several other countries. Therefore, India may not have to worry too much about the quantum of its external debt and its repayment capabilities.“That said, one cannot assume that it won’t feel the tremors of a global financial jolt whenever it happens,” he said. Global trade is important and foreign money plays an important role in the growth of any developing economy. Stocks of Indian companies with strong ties to the UK came under pressure and saw a knee-jerk reaction after the Brexit vote, but analysts say the bull run remains intact.The domestic equity market corrected sharply and most analysts across global brokerage firms were quick to downgrade earnings of companies belonging to sectors like IT, auto ancillary and pharma.“We are not surprised to the extent that in a bull market such negative news events do come. But when they do, they throw up opportunity to lap up shares,” said Jimeet Modi, CEO, SAMCO Securities.“We believe Indian companies are smart enough to manage in the changed business environment and may even turn out better. Even the UK market hit a 52-week high on Friday, setting aside the Brexit fears. Then why should the Indian market worry?” he said.