Relax! Brexit is not a calamity for India
Contrary to hopes of many, the Britain has voted to leave the European Union. As the news of Britain’s exit trickled in, Indian markets tumbled with the Sensex falling by more than 1,000 points.
So how does this event affects Indian stock markets? We spoke to a few fund managers to understand what they make out of this event.
Chandresh Nigam: A good buying opportunity with 3-5 years perspective Chandresh Nigam, MD & CEO, Axis Mutual Fund believes that the Indian economy is well-prepared to tackle this situation in the medium term. “In the short term, nobody knows how markets will behave; however, in the medium term, markets will recover due to strong fundamentals of our economy. A few companies, particularly listed in London, may witness decline in their profitability. However, a small positive of Brexit for India is that commodity prices will continue to head south. I believe the Indian economy will continue to witness GDP growth of over 7%. For me, it is a buying opportunity with 3-5 years perspective.”
Lakshmi Iyer: India is relatively insulated from this event to some extent Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mutual Fund is of the view that the Indian currency is likely to come under pressure in the near term. “The recent Brexit decision has led to volatilities in markets across the globe, including India. While a larger assessment of its impact of India is still underway, we are of the view that India is relatively insulated from this to some extent. Liquidity situation globally is likely to improve from the current levels, which would mean positive for world interest rates." Lakshmi believes that the Indian currency is likely to come under pressure in the near term. “However, the central banker’s intent to maintain an orderly bias in currency markets should take care of interim volatilities.”
Rajeev Thakkar: Selective buy opportunities may emerge in the turmoil Rajeev Thakkar, CIO, PPFAS Mutual Fund feels that Brexit will dominate the headlines for a few days till the attention of the world is diverted to a new event. “Britain was never a part of the single currency and the impact on business fundamentals is expected to be at the margins. The knee-jerk reaction seems to be on account of the fact that most people expected a verdict of remain in the EU and the vote has turned out to be exit. Selective buy opportunities may emerge in the turmoil.”
Ritesh Jain: Safe heaven assets to benefit Ritesh Jain, CIO, Tata AMC believes that volatility will increase as positions get un-wound and markets speculate on the future of Europe. He says that biggest beneficiary will be the safe havens - dollar denominated assets (especially short term US treasury) and gold.
S N Lahiri: Good time to increase equity exposure for tactical investors SN Lahiri, CIO, L&T Mutual Fund is of the view that Britain’s exit from European Union may jitter the Indian equity market for a couple of months at least. “India’s flagship IT sector will be affected due to Brexit. In addition, many Indian companies who have business in Britain will get affected. We will witness outflows from FIIs in the near term. This would definitely cause jitters in the market for a couple of months. However, considering the fundamental recovery of Indian economy, the market may rebound in 18 months.” He suggests investors to make a tactical call by investing lump sum in equity funds.
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