The verdict that world was looking for was delivered last week – Britain votes in favour of exit from EU. The financial markets worldwide tanked due to the panic it has created. The Indian benchmarks too , closed down at 26,397 for the Sensex and 8,088 for the Nifty. Comparing to other international indices, the Indian markets put up a resilient show as more buying pressure at downsides kept the support strong. Stocks with more UK exposure like Tata motors , Motherson sumi and Cox and Kings plunged more than 8%. More investors have moved funds from equities to safe havens like Gold. The reason why there is so much of panic is because EU is one of the largest trading blocs with China and US having a mjor chunk of it. The exit would bring in a lot of uncertainty and many trade agreements will have to be reworked. Investors also fear that the exit of UK could be the first of many more exits to come.
The Indian indices settled on a flat note last Friday after being volatile throughout the week. Concerns over Monsoon , speculation over Dr. Rajan’s continuity as te RBI governor , decision of US fed on interest rates and fears over the outcome of Britain’s exit were enough reasons for the markets to tread nowhere. The Sensex closed at 26,626 and the nifty closed at 8,170 – almost flat. In fact , buying interest at lower ends kept the markets at these levels without much damage.
After touching seven month high on last Tuesday, the Indian benchmark indices retreated – probably profit booking was the reason. Looking back from February 2016 , the indices have moved up more than 18% in 5 months and that’s quite enough to prompt profit booking.
Going ahead, investors may wait before exposing too much funds because we see a possibility of further downward movement in stocks. Gold prices shooting up in the past couple of days is one reliable evidence that investors are looking to park their funds in safe havens. Worries over Britain’s decision to stay away from EU , Chinese economic data and US Fed meeting that ends on Wednesday are good enough reasons to create too much of uncertainty among investors.
In the biggest weekly gain since March 4, the Indian benchmark indices –the Sensex and the Nifty registered a gain of 1351 and 406 points respectively. There were several positive reasons for it such as expectation of a good monsoon season, approval of the National capital goods policy, positive comments on the financial situation of India by rating agencies such as Fitch and Morgan Stanley, better than expected Q4 results and the fears of Great Britain exiting the Euro Union. The global markets were also on a song as new home sales data showed a surge in US signalling economic recovery.
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