Stocks

Sensex, Nifty reel as Brexit spooks world markets

Our Bureau Agencies Mumbai/London | Updated on January 20, 2018

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Sensex tumbles 1,091 points intra-day

After falling 1,091 points intra-day, the benchmark Sensex recovered some of its losses as markets stabilised at lower levels.

The Sensex opened 635 points lower on Friday. The benchmark index yo-yoed 1,091 points before closing at 26,397.71, still lower by 600 points or 2.24 per cent from the previous day’s close.

Similarly, the Nifty too ended down 181.85 points or 2.20 per cent at 8,088.60. It had touched an intra-day low of 7,927.05.

Among the Nifty 50, GAIL, Asian Paints, M&M, Bajaj Auto, CIpla and Sun Pharma ended higher.

On the Sensex, the stocks that gained were: Bajaj Auto, Asian Paints, GAIL,Sun Pharma, M&M, Cipla and NTPC.

The volatility index had 16% surged to a 3-month intra-day. The Vix fear gauge closed at 18.6275, up 3.37 per cent.

Tata Group stocks witnessed severe drubbing today, plummeting up to 13 per cent, as UK’s vote to exit the European Union spooked investors given the conglomerate’s huge exposure to the region.

Among bluechip Tata Group stocks, Tata Motors plunged 8 per cent, Tata Steel tanked 6.4 per cent and TCS dipped 2.7 per cent on the BSE.

The BSE 100 lost 2.24 per cent while the midcap and smallcap indices were down 1.07 and 1.46 per cent respectively. The BSE Bankex plunged 2.6 per cent while sectoral indices for capital goods and metals lost three to four per cent each, with all broad sectors taking a beating during trade on Friday.

Last night, UK citizens voted in an historic referendum to leave the European Union, leading to fears of protracted political and economic uncertainty in Europe, a weaker pound, higher inflation and slower growth in the UK. In a note, Morgan Stanley said that “this event does not in itself trigger a global recession, but our economics team forecast prior to the vote that global growth would likely be 3.1 per cent in 2017 in a "medium stress" UK exit scenario versus 3.4 per cent in the base case; this is due mainly to the impact on European growth and global financial conditions tightening.”

Karthik Rangappa, VP- Education Services, Zerodha, said, “Although there was a near equal split in opinion, the Brexit outcome comes in as a bit of a shock. The focus now would be on Bank of England and the kind of policy action they they would roll out. Yes, the sentiment across the global markets are highly negative and this is clearly rubbing off on Indian markets. However, this is not the time to make any hard conclusions but instead wait for events to unfold. I do believe Brexit fall is giving the Indian investor an opportunity to buy quality stocks.”

Chirag Mehta, Senior Fund Manager-Alternative Investments, Quantum AMC , said: As Britain votes to leave the EU, we see, increase in uncertainty in EU and UK, eEquity and currency markets have traded adversely to the verdict and more volatility is likely gold prices have jumped up about five per cent as uncertainty looms large

“More central bank intervention can’t be ruled out to minimize financial market volatility. Global risks are definitely rife. Commodity and debt bubbles in China; U.K. vote to leave the EU will increase uncertainty surrounding UK and EU as risk of contagion become real; Donald Trump’s campaign for the U.S. presidency; and the potential for central bank easing to amplify inflation fears. These uncertainties now pose as real risk as people stand up against the political comfort if the UK exit vote is anything to go by. Given the large uncertainties, an allocation to gold becomes extremely important.”

Published on June 24, 2016

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