India along with global markets will be impacted from Brexit as Indian companies are major investors in Britain
German foreign minister Frank-Walter Steinmeier said on Friday that Britain’s vote to leave the European Union marked was a sad day for Europe. The European jitters was felt by the overall global markets as Japan’s Nikkei and India’s Sensex plunged over 1,000 points intraday on Brexit worries. The ‘Leave’ camp got 51.8 per cent votes in the UK referendum, according to media reports.
Here are what Indian market experts think on how Brexit can impact Indian markets, including equity, commodity and rupee
Mihir Vora, director and chief investment officer, Max Life Insurance
Brexit is an event that none of the global markets i.e. equities, fixed income, currencies or commodities were positioned for. It is probably a once in a decade event for the markets and it can have several derivative events. The dust will take a while to settle. We expect central banks to step in with liquidity support and other stimulation measures. While there are no immediate negatives for India, a general risk aversion will mean reduced foreign flows in the short term. We expect the currency to weaken a bit and equity and fixed income markets to be volatile in the next few weeks. Further panicky movements could provide good buying opportunities. Beyond this, the progress of the monsoon is another key variable to watch.
Rajeev Thakkar, CIO, PPFAS Mutual Fund
Brexit will dominate the headlines for a few days till the attention of the world is diverted to some new event. Britain was never a part of the single currency and the impact on business fundamentals is expected to be at the margins. The knee-jerk reaction seems to be on account of the fact that most people expected a verdict of ‘remain’ in the EU and the vote has turned out to be exit. Selective buy opportunities may emerge in the turmoil.
Gnanasekar Thiagarajan, Director, Commtrendz Research
Global markets will continue to remain affected in the next couple of weeks after the actual impact of Brexit comes to sink in. I see gold at $1,425 an ounce in the coming days.
Ajay Bodke, CEO and Chief Portfolio Manager – PMS, Prabhudas Lilladher
We feel investors need to take a measured approach and not get carried away by doomsday scenario in so far impact on Indian economy and markets are concerned. Once the dust settles down, India will be seen to be a net gainer and inflows would continue to gravitate towards Indian shores.
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 grant. 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 economy in the world uncertainty in EU there is chance that investment can routed to India now. However Britain being the gateway of India to EU, ease of doing business with EU will hamper.
Rupee will be impacted indirectly as in case of Brexit. Pound and Euro will be volatile and is likely to depreciate against the dollar. Demand for yen and dollar as a relatively safe currencies will increase. A stronger dollar will put pressure on rupee and we may see rupee to depreciate further till 67.70-67.90
Nirdosh Gaur, managing director and chief executive officer, Moneypalm
India along with global markets will be impacted from Brexit as Indian companies are major investors in Britain and their current and future plans of investments can get hurt. Capital inflows to India will also get hurt in near future because investors will look for safer assets like gold and US Bonds.
Samir Lodha, MD, Quantart Market solutions
We do not expect rupee to appreciate much from current level and every dip should be an opportunity for importers to hedge. If US Federal Reserve hikes rate, there could be turmoil which will possibly take rupee towards 69-70 levels. However, if Federal Reserve do not hike rates, that will mean weakening growth and labour market prospects in USA. Such slowdown will bring global growth concerns to forefront and cause trouble in financial markets. Overall, global financial markets are quiet leveraged and monetary policy is losing steam in developed countries. Hence a turmoil is inevitable and rupee is likely to touch new low in 2016 second half. However India’s macro fundamentals are strong with a) high GDP growth b) lowered fiscal deficit c) current account surplus (lowered deficit at least) d) High Fx reserve of $363 bn e) political stability and f) moderated inflation. Overall rupee is likely to move towards 69 – 70 levels during second half of 2016. However a currency crisis which takes rupee to 73-74 level can be ruled out at this stage.
Karthik Rangappa, VP- education services, Zerodha
Although there was a near equal split in opinion, the Brexit outcome comes in as a bit of a shock. The focus now would be on Bank of England and the kind of policy action they would roll out. Yes, the sentiment across the global markets are highly negative and this is clearly rubbing off on Indian markets. However, this is not the time to make any hard conclusions but instead wait for events to unfold. I do believe Brexit fall is giving the Indian investor an opportunity to buy quality stocks.
Jimeet Modi, CEO, SAMCO Securities
The exit of Britain from the EU does raise questions and jitters, there are fears of a cascading effect occurring politically as well. Other EU members like the Dutch have already asked for a referendum and the very existence of the EU is now being questioned. There will be volatility in the currency.