‘Brexit will be shrugged off soon by Indian markets, monsoon progress will remain’

By: | Updated: June 24, 2016 2:08 PM

If monsoon is good, India would outperform many major equity markets of the world once again.

monsoon bse sensex nse niftyIf monsoon is good, India would outperform many major equity markets of the world once again. (Reuters)

Entire Europe accounts for just about 8 per cent of India’s total FDI inflows and its share in India’s FII inflows is also in single digit, according to Equinomics Research and Advisory. According to the brokerage house, India exports to entire Europe is less than 15 per cent of total exports.

On such a low base of India’s exports, even if there is an absolute fall of 10 per cent in exports to Europe, it wouldn’t impact much our overall exports, Equinomics research in a note said.

So what is going to impact our Indian equity markets post Brexit. Market experts believe, monsoon and corporate earnings will give direction to domestic stock markets in the short-to-medium term.

However, In the long-term only if events like Brexit lead to strengthening of global deflationary pressures, then Indian markets would have problems. India outperformed most equity markets in the world in the last one year.

“If monsoon is good, India would outperform many major equity markets of the world once again. Exactly in about two weeks’ time, most domestic market participants would forget the Brexit event like now no one talks about Bihar election, Greece crisis, Chinese market crash, said, G Chokkalingam, founder and managing director, Equinomics Research and Advisory.

On Friday, Britain voted to leave the EU in a deadly blow to the 28-nation bloc, forcing Prime Minister David Cameron to announce his resignation in the wake of defeat in the referendum whose result triggered a panic reaction in world markets and raised questions over immigration and other issues in the UK after the divorce. Brexit won finally by a wafer-thin majority of 51.9 per cent in the referendum held on Thursday that also raised questions over the longevity of the Conservative Prime Minister who aggressively campaigned for Remain.

According to market experts, domestic companies with a significant exposure to the UK markets may face some heat. Sunil Kumar Sinha, principal economist, India Ratings and Research said, “As the outcome of referendum on Brexit is in favour, the impact is felt across the globe. However, 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 and UK either through trade or in case their production units are located there would be adversely impacted.”

The BSE Sensex plunged over 1,000 points and Nifty slid below 8,000 mark on Friday.

(With agency inputs)

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition