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Dial B for Brexit

Pressing the panic button is specious, look sharp but don’t worry

BREXIT foxed the global markets whether it was equity, bonds, currencies or even commodities. The vote was slender with 51.9 per cent voting in favour and within the UK, Scotland and Ireland voting against the same. Scotland has begun to demand a fresh vote as it says it wants to remain with the European Union (EU) and the EU needs to act fast to hasten the exit of UK. A delay could force a few countries to think of exiting. India was comparatively better off than the emerging economies, being a largely self-consumption driven story, other than crude oil.

The skyline of buildings in London, seen from Waterloo Bridge as pedestrians walk by in central London. Pic/AFPThe skyline of buildings in London, seen from Waterloo Bridge as pedestrians walk by in central London. Pic/AFP

Closing
Our markets were actually up at the end of four days of trading and but for BREXIT, would have closed in positive territory. With losses of about 2 to 2.25 per cent on Friday, we closed in the negative. The BSE SENSEX lost 228.20 points or 0.86 per cent to close at 26,397.71 points while NIFTY lost 81.60 points or 1.00 per cent to close at 8,170.20 points. The broader markets lost similar with the BSE100, BSE200 and BSE500 losing 0.96 per cent, 0.86 per cent and 0.91 per cent respectively. BSE MIDCAP lost 0.40 per cent and BSE SMALLCAP lost 1.37 per cent.

In sectoral gainers, there was just one with BSE CONDUR gaining 0.35 per cent. The losers were led by BSE REALTY down 3.59 per cent. Other losers included BSE CAPSGOOD 2.46 per cent and BSE POWER 2.34 per cent. In individual stocks, the top gainer was PNB up 8.10 per cent followed by Dr Reddy 4.83 per cent and Bajaj Auto 3.95 per cent. The losers were led by SAIL down 5.15 per cent and followed by Tata Steel 3.99 per cent. London headquartered group companies of Anil Agarwal, Cairn lost 3.83 per cent and Vedanta 3.68 per cent.

The Dow Jones took a bad beating on Friday and ended the week with losses of 274.41 points or 1.55 per cent to close at 17,400.75 points. Global currencies were volatile and the pound lost sharply to the dollar. The Japanese central bank had to intervene to stop the yen from appreciating against the US dollar. The Indian rupee lost 88 paisa or 1.31 per cent to the USD to close at Rs 67.96.

Constant
The week ahead sees the June series expire on Thursday, June 30. Currently, the series is virtually unchanged with the NIFTY up a mere 18.95 points or 0.23 per cent up at 8,088.60 points. Four volatile days remaining and nothing in the kitty could see the series going either way, with neither bears or bulls having any upper hand.

In primary market news, the IPO from Mahanagar Gas Limited which opened for subscription last week received a huge response. The issue was oversubscribed a massive 64.54 times with QIB 72.84 times, HNI 191 times and retail portion 6.82 times. The number of applications received was 9.93 lakh, which is a record under the new SEBI rules introduced in November 2012 when CARE was the first IPO. The previous best was in the case of Ujjivan Financial Services Limited which had received 6.76 lakh applications.

Recovery
The markets will need time to recover from the Brexit contagion and it is not going to happen very soon. The silver lining for India is that we are fairly insulated from the crisis, being a self-consumption economy apart from the energy resources that we need to import. This turmoil will present umpteen opportunities to make money for the patient investor. One needs to be choosy going forward. There is no point in pressing the panic button as Brexit has already happened. The British Prime Minister David Cameron has resigned and so has the EU Commissioner of UK. Jobs in the financial market will would be cut as London’s importance as the financial capital of the world looks set to suffer a serious blow.

Advice to investors is that the worst is behind us. Look for opportunities to invest on dips. They will come your way over the next fortnight or so. There is no need to invest in just one day itself. Take your time. A final comment is that last week, I had asked readers to wait for the monsoon and stay away from markets. Those who did that stood to benefit. This week is to enjoy the Mumbai rain.

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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