Brexit: How does it impact India? Here are a few answers

By: | Updated: June 24, 2016 3:55 PM

As far as Britain is concerned, the die has been cast and its people wish to go it alone rather than be restricted by being part of the European Union. Here we cut through the mist and provide top Indian experts quotes about the Brexit issue:

As far as Britain is concerned, the die has been cast and its people wish to go it alone rather than be restricted by being part of the European Union. The issue was closed with PM David Cameron announcing he will be quitting as he had campaigned for Britain to remain in the European Union. Reactions have been many and varied. Some have predicted doom for the country, others have said there will be minimal impact, if any, while others have said that it will actually gain. Indian markets have reacted in a knee-jerk manner and plunged as much as 1,000 points even as gold prices rose 5.74% as investors ran for safe heavens. Here we cut through the mist and provide top Indian experts quotes about the Brexit issue:

Arundhati Bhattacharya, Chairman, SBI: Uncertainty of any sort results in volatility and Brexit will be no exception. As risk aversion sets in, there would be a decline in Financial Markets and India would see this impact along with other nations. However as trade strategies are reworked there could be potential advantages in the form of better market access for India to EU & UK.

Sunil Kumar Sinha, Principal Economist, India Ratings & Research: From India’s perspective Brexit will have both positive and negative impact. As Brexit will vitiate the already uneven and fragile global recovery, it will exert downward pressure on global commodity prices and India will benefit being a net commodity importer. However, with risk rising in the global financial market foreign capital will flow out putting pressure on rupee to depreciate and making Indian financial market volatile. A number of Indian corporates having exposure to Europe/UK either through trade or in case their production units are located there would be adversely impacted.

Sharat Dhall, President Yatra.com says, “Brexit has resulted in a big drop in the value of the Pound and if this trend remains then we could see a surge in leisure tourism to Britain, as it will become significantly cheaper. However, it is too early to establish that this drop in the Pound will be sustained and we are yet to see any surge in travel bookings to the UK. A drop in the Pound could also result in an increase in students from India choosing the UK as a destination as it will make education significantly cheaper there.”

Frederic Neumann, Co-Head of Asian Economic Research, HSBC: Exhale. Britain may have voted to exit the EU, and markets are in a tizzy, but Asia should come through this episode with only a few scratches. The trade exposure to the UK is minimal for most Asian economies, and risks to direct bank financing from UK financial institutions appears manageable. The impact of currency swings, in particular a stronger Yen, are harder to judge, tightening financial conditions for emerging markets in the region. Still, the fragility of the West, economically as well as politically, is a reminder that Asia can’t count on an export rebound any time soon to lift ailing growth. Reforms are urgently needed to put local demand growth on a more sustainable path. Time to get to work.

Rohit Gadia, CEO, CapitalVia Global Research: UK is the one of the largest contributors of the income of EU. Which is spent on administration, providing various grants. A British exit will impact EU revenue. Followed by Britain now more nations may want to exit from the union. Along with pound, rupee is expected to fall against dollar. We don’t see any long term negative effect in Indian market. India being one of the most open economies in the world uncertainty in EU is a chance for investment to be routed to India now. However, Britain being the gateway of India to EU, ease of doing business with EU will be hampered.

Jimeet Modi, CEO, SAMCO Securities: While markets are jittery, this is a god-sent event, especially for Indian investors. While we saw a steep fall in the indices, the trajectory of Indian markets remains upwards. After some stability, which will come next week, investors should lap up good quality stocks which will be available at good prices. IT & other companies which have significant revenues from Europe and UK will be affected and may be avoided as the extent to which the Pound will be impacted will be unknown. Focusing on Indian consumer goods like ITC, HUL and Asian Paints, BFSI stocks like HDFC Bank, Kotak Bank and Bajaj Finserv can lead to good returns for investors.

Ajay Bodke, CEO & Chief Portfolio Manager – PMS, Prabhudas Lilladher: Brexit would trigger fears of centrifugal forces getting unleashed. Other disgruntled members of the EU who are unhappy with the functioning of what they perceive to be an overbearing & opaque decision making apparatus of Brussels-based bureaucrats would demand  similar referendums from their national governments. This would be vehemently opposed by the governments in Germany & France who are advocating an ‘ever closer union’.

 

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