Brexit will mean risk-off in EMs; India could be hurt too: LGM

Jeff Chowdhry of LGM Investments feels if Britain votes to leave the European Union, it would cause a sort of a ripple effect across both European stock markets and the European currency investors may move into the yen or gold or US dollar. In an interview to CNBC-TV18, he says emerging markets too would be hit as investors turn risk averse.“In the short-term and short-term means just a couple of days, I think yes because it would definitely be a surprise, one,” he says.“Secondly, it would mean risk-off and in a risk-off environment, EMs including India would be affected on sort of a short-term basis,” he says.The biggest casualty of a ‘leave’ vote would be the pound sterling and the UK stock market which could fall as much as 5-10 percent feels Chowdhry.“In simple terms what would take a hit would be the currency, the pound, that would go down 5-10 percent easily,” he says.“The stock market, similar sort of magnitude, the UK stock market. Europe, yes, because I think it will cause not only problems as far as UK’s membership but also cause a chain reaction in terms of what other countries may do,” he says.Chowdhry sees a relief rally across markets in the event of a 'stay' vote, but does not expect that to be as big as the magnitude of fall if the vote goes the other way."I think also the markets which have really haven’t focused on what the magnitude of the ‘remain’ vote is; if it is very tight, let us say it is 52 and 48, there may be some question marks about David Cameron and his leadership of the government,"  he says."Obviously if there is a big ‘remain’ vote, let us say 60 and 40, then that would be less of an issue. So, we also not just have to look at the level of ‘remain’ vote if it is ‘remain’ but also what the magnitude of the win is as well," he says.