How Brexit wrought carnage for India’s UK linked companies

By: | Updated: June 25, 2016 9:24 AM

Shares of information technology companies declined in the range of 1%-8% during the session as the National Stock Exchange’s IT index closed 2.47% lower. Shares of Tech Mahindra, which earned 31% of its revenue from Europe last year, fell by 4.74%, while HCL Technologies lost 3.47% during the session.

brexit-reu-LBrexit: Tata Motors’ shares lost nearly 8% during the session. Nearly 35% of Tata Motors’ total revenue comes from the UK and the euro zone. (Reuters)

Companies with major exposure to the United Kingdom (UK) and the European markets were among the biggest losers during Friday’s trade as investors offloaded their holdings in these companies after Britain voted to leave the European Union.

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Shares of information technology companies declined in the range of 1%-8% during the session as the National Stock Exchange’s IT index closed 2.47% lower. Shares of Tech Mahindra, which earned 31% of its revenue from Europe last year, fell by 4.74%, while HCL Technologies lost 3.47% during the session.

The impact was also felt among auto and ancillary companies, which earn a significant part of their revenues from Europe. Tata Motors’ shares lost nearly 8% during the session. Nearly 35% of Tata Motors’ total revenue comes from the UK and the euro zone.

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Shares of auto component manufacturer Motherson Sumi lost 8.48% on the news of Brexit as close to 70% of the company’s revenues come from European markets.

Mahindra CIE lost 3.69% during the session. Shares of Bharat Forge, which holds 25% of its total assets in the current euro zone and has 15% of its total revenues flowing in from the area, closed down 0.35%.

Shares of Mahindra Holidays, whose 35% of revenue comes from Europe, declined 2.83%.

According to market participants, the Indian markets may continue to witness volatility for the next few sessions but in the long run, they would remain stable. “We expect Brexit and consequent events to weaken risk appetite, leading to flight to safe havens such as Japanese yen, gold, etc. The Indian rupee should remain under pressure, in line with the EM peers. However, stable macro fundamentals will support the rupee to outperform its EM peers,” said domestic brokerage Kotak Institutional Equities in a note to investors.

“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,” said Sunil Kumar Sinha, principal economist, India Ratings and Research.

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