Sensex tanks 604pts on global sell-off after UK votes to exit EU

Mayhem across the globe on Friday after the United Kingdom voted to leave 28-nation European Union also spilled over to Indian equity benchmarks. Actually the markets were prepared for Bremain following polls predictions but the Brexit came in as a surprise that spooked not only equity but also currencies and commodities except precious metals i.e. gold & silver that always known as safe-haven assets.

Indian equities plummeted 4 percent intraday with the Nifty breaking 8000-mark but the marginal recovery in Europe and likely buying by domestic institutional investors helped the benchmarks reduce losses considerably in last hour of trade.

The 30-share BSE Sensex plunged 604.51 points or 2.24 percent to 26397.71 and the 50-share NSE Nifty slipped 181.85 points or 2.20 percent to 8088.60. The BSE Midcap and Smallcap indices were down 1-1.5 percent.

The market breadth also improved as more than two shares declined for every share advancing on the Bombay Stock Exchange. In intraday trade, the advance:decline ratio was 1:11.

Experts expect the market to remain volatile for another weak due to Brexit and June F&O expiry but after that it will focus on domestic cues like monsoon, GST Bill and Q1FY17 earnings. According to them, these events are very important for India and will help the market surpass 8500 level in medium term.

As India is a domestic-focused economy unlike other countries in Asia, the need of the hour for the economy is to get the GST Bill passed in the Parliament, said Ramesh Damani, Member of BSE and NSE.

He says global markets will recover in time as Britain constitutes only 3 percent of the world’s total economy.

Nilesh Shah of Envision Capital says a Brexit may mean that markets will be dealing with a new economic order. How will it shape up is the biggest challenge and over the next 3-4 months investors need to be cautious and see value and allocate investments accordingly.For the week, the Sensex and Nifty lost 1 percent each.

European markets like France's CAC, Germany's DAX and Britain's FTSE were down 4.5-8.5 percent (at 16 hours IST) on Brexit vote. Sterling pound fell 10 percent against the US dollar to hit the lowest level since 1985.

The leave camp in UK secured 51.9 percent of the vote in 382 districts. David Cameron today announced his resignation as prime minister of the UK, saying in his statement the country will have new prime minister in place by October.

In Asia, the Japan's Nikkei 225 plunged nearly 8 percent on the back of stronger yen against the US dollar. Hang Seng & Kospi lost 3 percent and Shanghai fell 1.3 percent.

Brent crude futures were down 5 percent to USD 48.36 a barrel and US oil futures declined 4.8 percent to 47.72 a barrel (at 16 hours IST). However, gold gained 4.57 percent at USD 1320.80 an ounce.

Tata Motors (down 8 percent) and Tata Steel (6.4 percent) were the biggest losers on Sensex after the UK exited European Union. Both Tata Group companies have huge exposure to Europe.

Moreover, a media report suggested that Tata Steel and German-based Thyssenkrupp are poised to agree on merger of European steel business. Each could hold 50 percent in merged European Steel company and the agreement may be signed in few weeks, says the report.

Motherson Sumi (down 8.5 percent), Bharat Forge (down 0.35 percent), Mahindra CIE (down 3.7 percent), Apollo Tyres (down 0.84 percent), Infosys (down 1.4 percent), TCS (down 2.8 percent) and Tech Mahindra (down 4.7 percent) also have exposure to Europe.

Among others, ICICI Bank, HDFC Bank, Reliance Industries, L&T, Axis Bank, SBI, ONGC and Bharti Airtel gained 2-4 percent while Asian Paints, Bajaj Auto, Mahindra & Mahindra and GAIL bucked the trend, up 0.2-1 percent.

Sun Pharma rose 0.3 percent after the company announced buyback of 75 lakh shares at Rs 900 apiece.