Brexit Shock Stocktake: Here's What Analysts Have To Say About India

28/06/2016 4:18 PM IST | Updated 15/07/2016 8:27 AM IST
Hindustan Times via Getty Images
MUMBAI, INDIA - JUNE 25: A broker looks at his computer screen displaying the Sensex after Britain's exit from the European Union (EU), on June 25, 2016 in Mumbai, India. Britain voted to break away from the European Union on Friday, shattering the unity of a 60-year-old continental bloc, prompting the exit of Prime Minister David Cameron and rattling the world of finance and business. In India, shares fell more than 4% on the news but recovered by half after authorities moved to calm investor worries. The benchmark BSE ended 2.2% down, its biggest single-day percentage fall since February. (Photo by Arijit Sen/Hindustan Times via Getty Images)

The UK referendum to leave the European Union, or ‘Brexit’ rattled worldwide markets last week, and sent the BSE Sensex plunging by as many as 1,000 points. But analysts widely expect that, at worst, India should only see a ‘near-term’ impact from the historic vote. Here’s a roundup of analysts opinions in the aftermath of the vote.

- CLSA Chief Equity Strategist and Managing Director Christopher Wood told Biswajit Baruah of the Economic Times that Brexit was “completely irrelevant for emerging markets” including India. However, there could be some bearing from a “market sentiment” viewpoint. According to him, the overall event is much more negative for Europe than Britain.

- Ian Hui, Global Market Strategist with JP Morgan Asset Management, told ET the recent market sell-off should result in only a short-term impact on emerging markets, including India. India’s exposure to Brexit fallout is less as it doesn't have significant trading partnerships with Britain or the EU. “If we look at the actual numbers, exports from India to Europe as a percentage of GDP is around 2.1 per cent -- quite low compared to other Asian markets,” said Hui.

- Domestic equities and Indian markets will outperform their global peers and Brexit impact will only be short-term, according to poll of 21 brokerages and mutual fund houses conducted by Business Standard. About 64 per cent of those polled by BS said Brexit is a ‘near-term negative’, while 14 per cent called it a ‘non-event’ for domestic equities. Another 14 per cent said it would impact Indian equities in ‘medium-term.’

- According to Morgan Stanley analysts, India's economy will be among the least impacted in Asia by Brexit. “Hong Kong, Singapore, and Malaysia will rank as those which are most exposed, while the economies of Thailand, Indonesia, Taiwan, Korea and China would be moderately exposed and India and Philippines would be least exposed on a relative basis,” Morgan Stanley said in a report.

- According to credit ratings agency Crisil, Brexit is unlikely to have a notable impact on India's GDP (gross domestic product) growth in fiscal 2017. Crisil has retained its 7.9 per cent growth forecast, with agriculture as the swing factor. “In the short term, there may not be any significant downside to India’s exports,” Crisil said. However, a potential slowdown in the UK could impact the bottom line of Indian companies that serve the UK market. Additionally, volatility in commodity prices and currency depreciation of Indian rupee may make overseas borrowing more risky.

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