'Brexit' referendum in
focus next week; bias firm
( www.rupeedesk.in )
All eyes would be on UK's
referendum on the country's membership in the European Union on Thursday, and the
uncertainty surrounding it may keep investors on the side lines next week, even though market
participants believe that the underlying bias in equities is positive. The
British Referendum is once a
century type of event which could have a systemic bearing on some of the industries and companies.
As of yesterday, the 8000-put of Nifty 50 has the maximum open interest, which indicates that the
index may find support at that level in case investors adopt a risk-averse approach and sell equities
ahead of the referendum.
Yesterday, the Nifty 50 ended 0.4% higher at 8170.20, while the
S&P BSE Sensex gained 0.4% at 26625.91, after concerns over 'Brexit'
abated. The possibility of UK
staying in the Union seem higher, with market participants expecting undecided voters to swing towards
the 'Remain' campaign after the murder of British Member of Parliament Jo Cox, a backer of the
'Remain' campaign, by an alleged 'Britain First' supporter. The market is indicating that 'Brexit'
may not happen as UK'S undecided voters may choose to stay in the Union after Cox's murder. The
cascading effects of UK exiting the European Union on the global economy are unclear, but many
market participants fear it could cause disintegration of UK itself, and worse still, that of the
European Union.
This is only one of the
several headwinds that threaten the very existence of the Euro-zone which appears totally
dysfunctional and unable to address many social and economic problems that confront it. Ironically,
as we often see in the case of a bad marriage the area is bound together more out of the fear of what
will happen if it dissolves rather than because the relationship is working
well.
STOCKS IN FOCUS
Tata Motors would be the
stock in focus on account of UK's referendum. Earlier this month, Tata Motors's UK-based
subsidiary Jaguar Land Rover Automotive Plc said it supported UK's continued membership of the
European Union. It expects the company's key metrics to be hit if UK exits. Wockhardt is another
company which has significant exposure to the UK, and a weak pound sterling may hit the company's
performance in Apr-Jun. Among other stocks,
Bharti Infratel is expected to continue trading weak after the stock declined nearly 10% this weak
following ratings downgrades by Bank of America Merrill Lynch and Goldman Sachs.
( www.rupeedesk.in )
( www.rupeedesk.in )
