What experts say about 'Brexit'- Business News

What experts say about 'Brexit'

  • June 27, 2016  
  • |  
  • UPDATED   16:10 IST

Sunil Kumar Sinha, Principal Economist, India Ratings & Research

"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/UK either through trade or in case their production units are located there would be adversely impacted."

Vikas Khemani, President and CEO, Edelweiss Securities

In the short run, especially from emerging market perspective, one needs to watch out the trend in USD.  If the USD strength against GBP and EUR spills over to EM currencies, it will certainly be concerning. In this regard, Central Banks actions/support will be critical. BoE, ECB and even Fed would be on the watch in case any liquidity support is required to the system.  From medium term perspective two issues are worth considering. One the economic impact on Europe which may not be felt immediately but overtime. Business uncertainty can certainly rise which could lead to withholding investment plans. Second, does Brexit emboldens far-right/radical elements in other parts of Europe -Spain, France etc. This is important because Brexit phenomenon is actually partly the result of disenchantment of the middle/lower middle class with the elites/establishment given stagnation in their incomes, worries about immigration etc. If these movements grow, it can certainly weaken the EU. One silver lining one could see in all this is that it can strengthen the resolve of the elected governments across western countries to pursue a coordinated policy response - such as fiscal expansion to revive the global economy. India domestic macros remain strong and one has to live in strong global headwind environment and manage associated volatility from time to time.

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.

Shishir Baijal, Chairman and Managing Director, Knight Frank (India)

The vote to leave the EU increases near term risks facing the UK economy. An interest rate cut by the Bank of England is a strong possibility, as is more quantitative easing. For both residential and commercial property, there will be short-term market volatility. Potentially, and in selective instances, pricing could come under pressure.

One of the first outcomes of the result of the referendum is that the value of the pound and the stock market will fall in the near-term. Since business investment is curtailed, a technical recession is high. Further exporters and financial services firms will be in the forefront of the downturn. In light of the above risks we expect the Bank of England to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee's meeting in July, or perhaps earlier if required. We may also see a return of quantitative easing, if there are signs that investment is deteriorating. This we see coinciding with a devaluation of the pound. . The combination of lower prices and devaluation of the pound should draw in Indian investors looking to acquire assets in the UK. London has always been a favourite destination for Indian property buyers and it augurs well for the Indian investors to make their move now.

Jayant Manglik, President, Retail Distribution, Religare Securities

The verdict of Brexit referendum is out and Britain has voted to leave the European Union, causing mayhem across financial markets. Equity markets have reacted sharply world over to this outcome and trading with deep cuts as of now but market direction in each country will diverge from here as other factors specific to that location kick in.

Though the outcome is clear but such separation takes time to materialise as also its impact on changes in the demand-supply mechanics. In our case, it could cause marginal decline in Nifty in the immediate term, but domestic cues will take over quickly. The progress of monsoon so far is satisfactory. Another positive is the latest policy announcements to encourage FDI in several sectors. There is also a possibility for passage of GST bill in the upcoming monsoon session of the parliament. It is also noted that midcaps have been fairly resilient through the fall today.

So if we put together the immediate negatives from global markets and recent domestic developments, we're no doubt in a better position to absorb this setback and rebound quickly. It is an opportunity for investors to use this slide to add quality stocks like Bajaj-auto, M&M, Yes Bank, and Indusind Bank just to name few. Of course, counters from agri and consumption segments will remain in favour in short run so traders can think of accumulating them now while companies with UK exposure should remain on the avoid list for now.

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 & the very existence of the EU is now being questioned. There will be volatility in the currency, but as we cut across the noise, we must understand that the exit is not so simple. There will be negotiations in Brussels and the process itself could take a long time.

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.

After some stability that will come in next week,  investors should lap up good quality stocks which will be available at good prices. IT & 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. Focusing on Indian consumer goods like ITC, HUL and Asian Paints, BFSI stocks like HDFC Bank, Kotak Bank and Bajaj Finserv can lead to good returns for investors.