Grin and Brexit: Not too much to worry for India in the near future in spite of Sensex spiral

‘BREXIT’ has happened and the first thing is a black Friday in all financial markets globally. While equity markets fell, gold rose, crude oil fell and the British Pound touched its lowest level since 1985 falling to 1.35 to the US dollar. While the results show that 51.8 per cent voted to opt out of the EU, Scotland voted overwhelmingly to stay with the EU and this could lead to another vote some time later, of opting out of being a part of UK.

Indian markets opened weak and lost further ground initially, but recovered to close with losses of 2.24 per cent. The BSE SENSEX which was down almost 1,100 points finally lost 604.51 points or 2.24 per cent to close at 26,397.71 points while NIFTY lost 181.85 points or 2.20 per cent, to close at 8,088.60 points.

What next for India? Not too much to worry about as the world financial markets would need time to readjust to the changed scenario. Secondly, the turmoil in London and job losses there would keep everybody busy for the next few months. The British Prime Minister David Cameron has resigned, and Britain could be facing a general election sooner than later. Many of the global banks currently having large operations in the UK, would cut jobs and relocate to probably Germany or France.

Within the EU, the next challenge would be to contain the exit contagion and ensure a speedy exit for Britain, failing which things could get murky. European markets are currently down between 6 and 8 per cent and the US markets are down 3 per cent. The UK event would also put pressure on the Fed, and, there policy of cheap money and low interest rates would have to undergo a re-look and a new strategy as a strengthening dollar could become a hurdle.

In short just when the world was trying to settle its house and bring things under control, BREXIT has just shaken up everything. It would take a lot of sacrifice from a number of people to first bring sanity and then try and restore things. The EU unity is under threat and Germany and France need to work double quick to ensure that there are no splits in a four decade partnership that has been under severe strain.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.

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