Market tumbles as British broadcasters forecast Brexit a reality

Carnage was witnessed in global stocks after British broadcasters forecast that British voters have voted for Britain to leave the European Union (EU) in a historic referendum dubbed "Brexit". At 10:16 IST, the barometer index, the S&P BSE Sensex, was down 980.84 points or 3.63% at 26,021.38. The Nifty 50 index was down 305.55 points or 3.69% at 7,964.90. The Nifty slipped below the psychologically important 8,000 mark. The Sensex first fell below the psychologically important 27,000 and then below the next psychologically important 26,000 level. It later regained the 26,000 level. In overseas stocks market, trading was halted in Nikkei 225 Average in Japan as circuit breakers were applied after a steep fall. Trading in US index futures indicated that the Dow Jones Industrial Average could slump 666 points at the opening bell today, 24 June 2016.

Results announced so for in the Brexit referendum showed that the UK was on the brink of leaving the EU. Britain's exit from the EU could destabilize the trade bloc. Britain has been a member of the trading bloc since 1973. Voting in the referendum was concluded in a single day yesterday, 23 June 2016.

The Sensex fell 1,012.81 points, or 3.75% at the day's low of 25,989.41 in morning trade, its lowest level since 26 May 2016. The index fell 634.74 points, or 2.35% at the day's high of 26,367.48 in early trade. The Nifty fell 318.25 points, or 3.85% at the day's low of 7,952.20 in morning trade, its lowest level since 26 May 2016. The index fell 212 points, or 2.56% at the day's high of 8,058.45 in early trade.

The broad market depicted weakness. There were more than 12 losers against every gainer on BSE. 1,818 shares fell and 148 shares rose. A total of 67 shares were unchanged. The BSE Mid-Cap index was currently down 3.5%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index was currently down 4%. The decline in this index was higher than the Sensex's decline in percentage terms.

In overseas stock markets, Asian shares tumbled, with the Nikkei 225 Average in Japan hitting lower circuit limit as investors scurried for cover with a referendum expected to show a majority of voters want the UK to leave the EU. The safe-haven yen surged against the dollar. A stronger yen hurts the competitiveness of Japanese exporters. The Japanese currency is perceived as a haven in times of global financial and global economic worries.

Trading in US index futures indicated a sharp setback for US stocks at the opening bell after reports signaled that the UK was on track to exit the European Union in a landmark vote that investors fear could destabilize the trade bloc. Trading in index futures indicated that the Dow Jones Industrial Average could slump 666 points at the opening bell today, 24 June 2016.

The stunning moves come after global markets rallied, betting that Britons would vote to reject Brexit, or a British exit from the EU.

Closer home, Minister of State for Finance Jayant Sinha reportedly told in an interview to a television channel that India is focusing on the market dislocations arising from a likely British referendum vote to leave the European Union. Sinha reportedly said that it is too early to assess the trade impact of the Brexit on India.

Auto stocks slumped. Ashok Leyland (down 3.83%), Escorts (down 3.82%), Hero MotoCorp (down 3.09%), TVS Motor Company (down 2.84%), Mahindra & Mahindra (down 2.72%), Bajaj Auto (down 2.51%) and Eicher Motors (down 2.33%), edged lower.

Car major Maruti Suzuki India lost 2.71% as the Japanese yen strengthened against the dollar. A strong yen adversely impacts Maruti's operating profit margin. Maruti pays royalty to its Japanese parent Suzuki Motor Corporation in yen terms for some of its earlier models. Maruti has reportedly started paying royalty to its Japanese parent in rupee terms on all new models from 1 April 2016. Maruti also has an exposure to the yen to the extent it imports raw materials from Japan.

Tata Motors (down 11.11%) and Tata Steel (down 6.77%) tumbled after British broadcasters forecast that British voters have voted for Britain to leave the European Union (EU) in a historic referendum. 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.

Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe. Tata Steel Europe has initiated the process to sell its UK business viz. Tata Steel UK. Tata Steel Europe has invited seven short listed potential investors to submit binding bids for Tata Steel UK.

Metal shares slumped as copper prices fell. Vedanta (down 6.6%), Hindalco Industries (down 6.58%), Jindal Steel & Power (down 5.33%), Steel Authority of India (down 5.12%), Bhushan Steel (down 4.02%), Hindustan Copper (down 3.36%), Hindustan Zinc (down 2.95%), NMDC (down 2.51%), JSW Steel (down 2.21%) and National Aluminium Company (down 0.85%), edged lower.

High Grade Copper for July 2016 delivery was currently down 3.68% at $2.083 per pound on the COMEX.

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