Sensex sinks 1,000 points as Brexit fears emerge; Nifty below 8,000

All 51 components of Nifty50 are in negative zone with Tata Motors leading the decline, down over 10%

Benchmark indices have tumbled in trades today with a decline of around 4% on fears that poll results which are indicating a higher probability of Britain exiting the European Union would hurt revenues and profitability.

At 11:15 am, the S&P BSE Sensex lost 936 points to quote at 26,067 and the Nifty50 shed 311 points to trade at 7,959. 

The broad market depicted weakness. There were almost 22 losers against every gainer on BSE. 1,174 shares fell and 52 shares rose. A total of 23 shares were unchanged. The BSE Mid-Cap index was currently down 3.38%. The BSE Small-Cap index was currently down 3.75%. The decline in both these indices was higher than the Sensex's decline in percentage terms.



"There might be a short-term knee-jerk reaction to "Brexit" as it may lead to some volatility in the global market owing to some uncertainty linked to the future of EU. However, “Brexit” may not have an immediate fundamental impact on the companies and countries that are exposed to the UK, as the UK and the EU would enter into a two-year negotiation period during which all trade treaties would be intact. India today is well placed from a current account and FX reserves perspective to alleviate any impact on currency from portfolio outflows. Moreover, we have seen time, and again that money eventually flows to economies that provide the highest yields and in such a scenario, India would get a larger share of flows as the Indian economy looks well placed with the possibility of a normal monsoon and good growth prospects," says Ankit Agarwal, Fund Manager, Centrum Broking. 

Nineteen sectoral indices on BSE dropped between 2%-6% amid sharp slide on the bourses as global markets roiled after Britain voted to leave the European Union.

Top losers from the Sensex pack are Tata Motors, Tata Steel, ICICI Bank, Axis Bank and SBI, all plunging between 6%-12%.

Ten metal and mining stocks fell are down upto 9% on the BSE as copper prices fell in global commodities markets. Meanwhile, the S&P BSE Metal index was down 483.31 points or 5.69% at 8,011.24.

Tata Steel (down 8.9% at Rs 304.05), Vedanta (down 8.97% at Rs 115.15), Hindalco Industries (down 7.71% at Rs 114.30), Jindal Steel & Power (down 6.32% at Rs 61.50), Steel Authority of India (down 6.14% at Rs 41.25), Hindustan Copper (down 3.74% at Rs 50.15), Hindustan Zinc (down 3.64% at Rs 168.25), JSW Steel (down 3.63% at Rs 1,349.55), NMDC (down 2.4% at Rs 89.45) and National Aluminium Company (down 0.85% at Rs 41) edged lower.

High Grade Copper for July 2016 delivery was currently down 3.58% at $2.085 per pound on the COMEX.

********************************
Updated at 10:30 am

Markets have extended losses and are trading near day's low, amid weak Asian cues, after early counting on the EU referendum indicate that 'leave' votes are slightly more than 'remain'. Sharp decline in the rupee further accentuated the fall.
 

At 10:30 am, the S&P BSE Sensex lost 1034 points to quote at 25,968 and the Nifty50 shed 328 points to trade at 7,942. In the broader market, BSE Midcap and Smallcap indices are trading lower by over 3 % each in line with the larger counterparts.

"Market has breached 8,000 levels and once the event is out of the way so any recovery one should reduce position as 7,500 could be on cards," said AK Prabhakar, head-research, IDBI Capital.

The Indian rupee lost 1% in opening trade on early trends that Britain would leave the European Union following a nationwide referendum.

The rupee opened at 67.88 a dollar, from its previous close of 67.25 a dollar, but fell to 68 a dollar within a few minutes of opening trade,  not very far from its lifetime low of 68.85 a dollar reached on 28 August 2013. At 9.17, rupee was trading at 68.18 a dollar.

"As good deal of negativity may have been priced in at open, potential for value buying or a bounce back, is higher than the potential for extended downside. With only a few stocks have significant exposure to EU/UK, the impact on Indian stocks may not be en masse, with strong domestic cues in the backdrop. However, companies that have exposure to yen could see significant volatility. Rupee is likely to weaken against US Dollar, as the greenback is expected to see demand as a safe haven currency in the Brexit backdrop. But with forex reserves near record peaks, and with recent instances of RBI stepping in to arrest volatility, rupee is less expected to weaken much beyond 68," says Anand James, Chief Investment Strategist, Geojit BNP Paribas.

Meanwhile, as gold at the highest level since July 14, 2015 as official results so far from a British referendum pointed to a victory for a campaign to exit the European Union.

GLOBAL MARKETS

Asian markets pared early gains and turned negative after investors turned sellers after initial results of the EU referendum indicated probability of Britain leaving the European Union compared to the earlier opinion poll predictions of 'remain'. Shares in Japan were the top losers with the Nikkei down over 3% while the Shanghai Composite was down 0.6%. Shares in Hong Kong were also sharply lower with the Hang Seng down nearly 3% while the Straits Times eased nearly 1%.

US stocks ended over 1% higher on Thursday after opinion polls indicated that the Britain is most likely to remain a member of the European Union. The Down Jones industrial average ended up 1.3% at 18,011, the S&P 500 ended up 1.3% at 2,113 and Nasdaq Composite ended up 1.6% at 4,910.

US stock futures plunged, as results of the UK referendum on European Union membership pointed toward a vote to leave the bloc after more than four decades of membership, fanning speculation that a divided Europe would put another brake on already fragile global growth. S&P 500 Index contracts slumped 4.9%, joining losses in equity futures in the UK.

BREXIT LINKED STOCKS

Metal companies like Tata Steel and Hindalco, auto majors such as Tata Motors, Motherson Sumi, IT companies like TCS, Tech Mahindra, HCL Tech and Pharma companies like Lupin, Dr Reddy’s Laboratories are likely to get impacted the most in case Britain decides to leave European Union (EU). Tata Motors cracked 8%, Tata Steel slumped 61%, Hindalco lost 4%, Motherson Sumi lost 9%, Lupin and Dr Reddy’s Lab lost 2% and 1.3% respectively.

Other stocks in news include Sun Pharma whose board approved announced a Rs 675-crore buyback offer, to purchase up to 7.5 million equity shares. The board fixed a price of Rs 900 a share, a premium of 19.7% over Thursday's closing Rs 751.70. The stock is trading with marginal losses.

State Bank of India  plans to raise $1.5 billion from foreign markets via bonds to fund its expansion and pay off securities maturing in the year. The stock lost over 3%.

India on Thursday launched a pilot project aimed at introducing compressed natural gas (CNG) as fuel for two-wheelers. The project, nick-named "Hawa Badlo", is being implemented by Delhi's city gas distributor Indraprastha Gas Ltd (IGL) and its parent firm, GAIL (India). GAIL is down 2%.

ONGC, IOC, HPCL, BPCL: Indian state oil firms may buy a stake in Russian oil major Rosneft, oil minister Dharmendra Pradhan said, signaling a move that would hoist the country's overseas energy portfolio to a new high as the company pumps more oil than ExxonMobil. ONGC, HPCL, BPCL,IOC have declined up to 3.5%.

Car major Maruti Suzuki India has lost 3% as the Japanese yen strengthened against the dollar. The Japanese yen surged against the dollar on global risk aversion generated by Brexit fears.

The Japanese currency is perceived as a haven in times of global financial and global economic worries.

Tata Motors and Tata Steel have plummeted between 9%-12% ahead of the Brexit referendum outcome. Both Tata Steel and Tata Motors have large operations in UK and Europe.

Tata Motors derives majority of its revenue from its British luxury car unit Jaguar Land Rover (JLR). JLR is the largest automotive manufacturer in Britain. It is one of the UK's largest exporters and generates over 80% of its revenue from exports.

Shares of ten IT companies have fallen between 2%-5% as early voting returns on the Brexit referendum suggested Britain was on the brink of leaving the European Union

TCS (down 2.41%), MphasiS (down 4.01%), HCL Technologies (down 4.61%), Tech Mahindra (down 3.85%), Oracle Financial Services Software (down 2.42%), Wipro (down 2.09%), Infosys (down 2.23%), Persistent Systems (down 4.6%), MindTree (down 3.01%) and Hexaware Technologies (down 2.34%) edged lower. The UK is the second biggest IT outsourcing market after the United States for the IT companies.

Stocks of four companies involved in oil exploration & production activities are down upto 4% as global crude oil prices dropped post referendum results suggesting a vote for Brexit.

Cairn India (down 4.05%), ONGC (down 3.9%), Oil India (down 2.22%) and Reliance Industries (RIL) (down 3.33%) dropped.

Lower crude oil prices will result in lower realization from crude oil sales for oil exploration & production (E&P) firm.


With Reuters & Capital Market input