Britain’s decision to leave the European Union triggered a knee-jerk reaction in stock markets across the globe on Friday. Reacting on the development, domestic benchmark indices BSE Sensex tanked over 1,000 points intraday and Nifty breached 8,000 mark.
The exit of Britain from the EU raised fears of a cascading effect occurring politically with other EU members like the Dutch already asking for a similar referendum.
Jayant Manglik, president, retail distribution, Religare Securities said, “There will be volatility in the currency market, but as we cut the noise, we must understand that the exit is not so simple. 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.”
According to experts, if stability emerges this week, investors should lap up good quality stocks available at good prices. IT and 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.
According to reports, Indian IT companies get anywhere between 6-18 per cent of their revenues from the UK, which has traditionally been the gateway to Europe.
Shares of companies with exposure to the UK witnessed massive selling pressure on Friday following the UK’s vote to exit the European Union. Shares of Tata Motors and Tata Steel slumped over 10 per cent intraday on Friday.
Jimeet Modi, CEO, SAMCO Securities said, “Focusing on Indian consumer goods like ITC, HUL and Asian Paints, BFSI stocks like HDFC Bank, Kotak Mahindra Bank and Bajaj Finserv can lead to good returns for investors.”
Chandan Taparia, analyst, Anand Rathi Financial Services said, “It is a right time to look for defensive stocks. One can invest in stocks like Sun Pharma, Emami, Dabur, HUL, Granules India and Lupin.”
In heavy selling on Dalal Street, Sensex ended 604.51 points lower on Friday to 26,397.71, its biggest single-day fall in nearly four months. As a result, total investor wealth, measured in terms of cumulative market value of all listed stocks, tanked nearly Rs 1.79 lakh crore.
The 50-share NSE Nifty, which breached 8,000-level to hit a low of 7,927.05 on June 24, managed to recover part of the initial losses and settled 181.85 points or 2.20 per cent down at 8,088.60.
The rupee also took a sharp plunge of 96 paise (intra-day) on Friday against the US dollar to crash below the 68-level, but RBI intervention to infuse liquidity helped the local currency recoup some early losses.
After the crash, G Chokkalingam, founder, Equinomics Research and Advisory said, “Monsoon progress will determine the market trend going forward. One can invest in Britannia, JB Chemical, HUL, Lupin and HPCL in the present market scenario.”
Motilal Oswal is bullish on PVR with target price of Rs 1,140.