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Brexit, monsoon keep markets volatile; end flat

The benchmark BSE Sensex dropped around 99 points in early trading on Monday on sustained selling by funds and retail investors, extending Friday’s sharp losses caused by Britain’s decision to leave the European Union.

business Updated: Jun 27, 2016 18:36 IST
The BSE File 30-share barometer tanked 98.84 points, or 0.37%, to 26,298.87.
The BSE File 30-share barometer tanked 98.84 points, or 0.37%, to 26,298.87.(File Photo)

Indian stock markets were volatile on Monday reflecting the weak global sentiments due to Brexit on one side and the optimism from an improving monsoon and economic prospects on the other.

The 30-share sensex ended almost flat – it rose 5 points to 26,402.96 points – after opening high to subsequently fall by about 90 points.

While the impact of Britain leaving the European Union continued to gnaw at most markets including Asian indices, a likely intervention policy by Japan’s central bank and positive appreciation by Moody’s on India’s recent foreign direct investment norms brought in cheer to the markets.

The Nifty on the NSE ended up 6 points at 8,094.70 points.

“Brexit is a landmark event. Everyone agrees on the challenges but the answers are not obvious to policymakers in the UK or to market participants and may not reveal themselves until discussions between the UK and the EU begin and until the UK makes a number of subsidiary political choices,” said Nikhil Narayanan, partner with legal firm Khaitan & Co. “Apart from the immediate impact on any sterling revenues as a result of volatility, Indian businesses will have some time to evaluate their strategic alternatives.”

Some of the gainers on Monday included pharma major Dr Reddy’s (up 3%), SBI (up 2.7%), Sun Pharma (up 2.6%), Cipla (up 2.6%), while those that lost included TCS (down 2.9%), Infosys (down 2.3%), Asian Paints (down 1.4%).

“The immediate impact on India’s economy is likely to be felt via the financial-market and confidence channels. However India’s relatively strong fundamentals are likely to leave it less exposed than Asian peer economies,” say analysts Saurav Anand and Anubhuti Sahay of Standard Chartered Global Research. “The domestic orientation of India’s economy is likely to keep the need for monetary or fiscal support minimal, though these tools can be used if warranted. We maintain our call of ‘no rate cuts’ from the Reserve Bank of India in 2016-17 unless oil prices are lower than expected or food inflation falls faster than expected.”

Last week, Moody’s Investors Service said in a note that the India’s decision to relax foreign direct investment rules is credit positive for its Baa3 sovereign rating because the move demonstrates a continuation of reform momentum and paves the way for private investment and a boost in productivity.