Ahead of the outcome of the referendum in the UK on whether Britain should remain a member of the European Union (EU), the BSE Sensex on Thursday soared 236.57 points or 0.88% to close the session at 27,002.22 .
Ahead of the outcome of the referendum in the UK on whether Britain should remain a member of the European Union (EU), the BSE Sensex on Thursday soared 236.57 points or 0.88% to close the session at 27,002.22 . Stocks including — Tata Motors, Infosys, Aurobindo Pharma, Bharat Forge, Cox & Kings and Tata Steel — that have a considerable amount of exposure to the UK and European markets — gained anywhere between 0.2%-3.5%. Experts believe the rally in the Indian markets are an outcome of the opinion polls conducted last week which indicated that Britain would remain and continue to be part of the EU.
Axis Capital pointed out that Brexit will lead to UK needing to renegotiate all trade agreements with individual countries. Hence, for companies with significant revenues from Euro zone, Brexit won’t be the most important factor.
A negative impact is likely to be more on Auto and ancillaries and Tata Steel with operations in Europe compared to information technology (IT) and pharmaceutical exporters whose effect may be partially offset by USD appreciation in immediate term, it said in a report.
Nearly 35% of Tata Motors’ total revenues come from the UK and the Euro Zone. The company gained 3.28% and closed at `488 apiece. Auto components maker, 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, surged 2% intraday and was last traded at `752.75 per share. IT firms like Infosys and Wipro both of which are large exporters of their products to the Euro Zone and
UK, gained 1.08% and 0.12%, respectively.
British Prime Minister David Cameron, in a public speech ahead of the referendum on Tuesday pointed out that Brexit could result to the economy slipping into a brief recession. He warned that Brexit would hit jobs and opportunities for years to come.
Currently, European markets make nearly 70% of Britain’s total export market. According to international brokerage, Nomura, since the beginning of June, market participants have been wavering between hope and fear over prospects of the UK leaving the EU or remaining in it.