Brexit Impact: 4 Lakh Cr Knocked off From Indian Investors’ Wealth

(Photo: Reuters)

UK’s vote to exit the European Union played havoc, and knocked off nearly Rs 4 lakh crore from the investors’ wealth in Indian stock markets within minutes of opening for trade on Friday.

The total investor wealth, measured in terms of cumulative value of all listed stocks, including that of promoters, fell below the Rs 98 lakh crore-level early morning as reports from the UK showed Britain voting against remaining with the EU bloc.

With such a massive shock to the market, the rupee also nosedived to 68.12 against the US dollar in early trade. 

Indian Economy Has Good Fundamentals, Sizeable Foreign Reserves: Raghuram Rajan

Reserve Bank of India Governor, Raghuram Rajan, provided an optimistic outlook on the impact of the Brexit poll. He said that Brexit does raise concerns, but India is well placed to cope with the shocks, as the economy has good fundamentals which should help it fight the volatility.

RBI is watching all markets, including currencies, and will provide liquidity wherever necessary.

Raghuram Rajan, RBI Governor

Rajan further added that the Fed rate hike, which is likely to get delayed because of Brexit, will help in the adjustment to the shock.

Talking about the fall of the rupee, Rajan added that the Indian currency has shown one of the more stable reactions in comparison to currencies around the globe and as such the rupee’s fall does not bother him.

Will Try to Minimise Brexit Impact on the Economy: Arun Jaitley

India’s Finance Minister, Arun Jaitley who is on a five-day visit to China, has cautioned world markets by saying they will have to brace themselves for a period of possible turbulence while being watchful about, and alert to, the referendum’s medium term impacts. But talking about India he painted a positive picture.

We are well prepared to deal with the short and medium term consequences of Brexit. Our macro-economic fundamentals are sound with a very comfortable external position, a rock-solid commitment to fiscal discipline, and declining inflation. Our immediate and medium-term firewalls are solid too, in the form of a healthy reserve position.

Arun Jaitley, Finance Minister

India’s Finance Secretary, Ashok Lavasa said that the RBI is ready with measures to curb volatility, while India’s Banking Secretary, Anjali Duggal tried to downplay market fears by claiming that Brexit will impact India only in the short-term, as no medium or long-term impact is expected.

Reacting to the the sharp fall that the Sensex saw in the morning after it slumped to 26,036.40, down by almost 965.82 points, India’s Economic Affairs Secretary, Shaktikanta Das said:

The Government is prepared for all eventualities. The stock market fall was an initial spontaneous reaction.

In a bid to infuse confidence in the markets, Das pointed out that the rupee’s depreciation is in-line with other Asian currencies, and if the slump continues, the RBI has discussed contingencies to deal with all possible eventualities.

He further went on to add that India’s trade with Britain is not going to be impacted significantly after Britain’s walks away from the Union.

Friday saw heavy demand for the dollar from importers and banks as foreign fund outflows impacted domestic currency, forex dealers said.

To counter this, the RBI is looking to intervene in the forex market with added liquidity support.

On Thursday, the rupee had ended 23 paise higher at 67.25 on selling of dollars by banks and exporters in view of the weakening dollar in the overseas market amid a sharp recovery in equities.

(With agency Inputs)