Markets shrug off Brexit blues

The United Kingdom (UK) may have left the European Union last week, but the markets seem to have moved on after Friday's 180 points drop in the NSE Nifty.

Indian stock markets went up for four straight days since Friday, erasing the losses suffered after Brexit, as market participants were confident about the prospects of the domestic economy. The rally in global equities too provided the much needed support to Indian markets.

The Nifty closed at 8287.75 points, the highest level for 2016. Even on an intra-day basis, the Nifty touched 8,308.15, a level last seen in October 2015.

The BSE Sensex gained 2.3% over the last week to close at 26,999.72 points on Thursday and was 1% higher over Wednesday's close.

 

Some commodities too have gained in the first half of 2016. Silver was trading at a two-year high of Rs 43,500 a kg. The Bloomberg Commodity index too is near its six-month high made earlier this month. On a half-year basis, the index has gained the most in the first six months of 2016, since 2010.

"The market position from here on is expected to go up," said Deven Choksey, managing director, KR Choksey Shares & Securities. He further said, "Brexit has turned into a sort of a blessing in disguise for India as crude oil prices have fallen, which will be good for corporate earnings."

In commodities, gold was up 24.3% in the first half of 2016, while silver advanced 32.8%. Sugar, soyabean meal and zinc were the other top performing components of the Bloomberg Commodity index.

Other factors such as the Seventh Pay Commission award, the progress of monsoon, the possibility of the passage of Goods and Services Tax Bill in the monsoon session of the Parliament, and the expectations of good results in the June 2016 quarter have buoyed the sentiment on Dalal Street.

"India has a good growth potential and the rest of the world will now look at India in times of global turmoil. This can help more money come to India," added Choksey.

Vetri Subramaniam, chief investment officer and fund manager, Religare Investment Asset Management Company said, "Markets around the world are recovering post Brexit. As far as India is concerned, the focus will be on the strength of the recovery. A lot more will now depend on the visibility of earnings growth." He further said, "The good news is that there is no financial dislocation because of Brexit."

It was also the last day of the June derivatives contracts. Chandan Taparia, derivatives analyst at Anand Rathi said, around 77% of the contracts were rolled over, which was better than the past six-month average, indicating that participants were carrying their position to the next month in the hope of further upside.

Choksey added, "We see the 8,300-point level as a base for the markets. In this financial year, we expect markets to reach 8,700- 9,000 points."

Asian markets too ended positive as Brexit fears seem to settle down on expectations that global central banks will be able to steer the global economy from financial problems. Indices such as Nikkei, Hang Seng and Straits Times closed higher than Wednesday. However, major European indices were trading mixed on Thursday afternoon.

Among individual stocks, Dr Reddy's Laboratories, Axis Bank, Tata Motors and Tata Steel were among the major Sensex gainers on Thursday, ending 2-4% higher over previous close. Continuing their rally from Wednesday, consumer stocks such as Asian Paints, Hero MotoCorp and Hindustan Unilever gained between 1-2% each over the previous close.

Meanwhile, foreign institutional investors (FIIs) showed confidence in domestic equities as they were net buyers to the tune of Rs 1,107.42 crore on Thursday as per the provisional stock exchange data.