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As voting got under way in the UK on Thursday on a referendum to decide if Britain will remain in or leave the European Union, officials in India said they were prepared for any eventuality.
Economic Affairs Secretary Shaktikanta Das, who was to accompany Finance Minister Arun Jaitley to China for the Secretary-level India-China Financial Dialogue, stayed back to counter any after-effects of a decision by Britain to leave the European Union (‘Brexit’).
On Thursday, stock markets in India and abroad finished largely positive on the strength of the latest ‘poll of poll’ results, which suggested that the odds on ‘Brexit’ had diminished . The poll results will be announced on Friday around noon IST.
Analysts reckon a Brexit vote will trigger uncertainty in Europe and other financial markets, including in India.
Forex cushionHowever, Das pointed to the adequacy of forex reserves –– $360 billion as on June 10 –– to say that Finance Ministry officials were well prepared. India continues to be an attractive FDI destination globally, and any impact will be minimal, he noted. The UK is one of the largest FDI investors in India, accounting for $898 million inflows in 2015-16.
Markets uncertainIn recent days, markets in India have been see-sawing a bit, unsure of what to make of the vote.
The benchmark Sensex lost a cumulative 100 points on Tuesday and Wednesday, but rallied on Thursday to close up 237 points at 27,002. The Nifty gained 0.81 per cent on Thursday to close at 8,270.45.
Foreign investors were subdued on Thursday, buying net equity of only ₹81 crore, while domestic institutions were net buyers to the tune of ₹203.56 crore. Retail investors sold net equity of ₹48 crore on the BSE. No long-term slide seen
“If Brexit happens,” Jayant Manglik, President, Retail Distribution, Religare Securities Ltd, said, “we could see some knee-jerk reaction in our markets, but don’t expect any big slide in the Nifty index.” Stocks of Indian companies operating in Europe, especially the UK, might react negatively, he added.
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