Indian stock markets and the rupee are likely to open gap down, tracking huge volatility in global financial markets today. The British pound sank over 8 per cent, its biggest fall in living memory as Brexit vote led in UK referendum. A vote for Brexit will unleash volatility not seen in a quarter of a century, analysts say.
Here are the latest developments:
1) The pound plummeted from about $1.50 to almost $1.36 as results showed stronger-than-expected support for quitting the European Union. The pound was trading at the lowest since 2009. The FTSE100 futures traded nearly 9 per cent lower, suggesting a collapse in UK stock markets.
2) If UK is forced to quit the 28-nation European Union, its $2.9 trillion economy is likely to slip into recession. More importantly, London’s pre-eminence as global financial hub will come under threat. It is this fear that has sent massive shockwaves across financial markets.
3) In India, the Nifty futures trading on Singapore Exchange slumped over 2.5 per cent, indicating a huge fall for domestic markets today. The BSE Sensex could open at least 700 points lower if current trend in futures trading prevails. The rupee is also likely to fall sharply, tracking the carnage in pound as well as the euro. Some analysts expect the rupee to slump near its record low of 68.85 hit in August 2013. The rupee closed at 67.25 per dollar on Thursday.
4) Shares of companies with large businesses in the UK or Europe are likely to come under tremendous pressure today. Tata Motors, whose Jaguar Land Rover unit in UK will suffer profitability hit if Brexit vote goes through, will be in particular focus. IT companies, including TCS and Infosys, will also remain under pressure, as the depreciation in pound will impact their profitability.
5) In Asia, the Nikkei index in Japan was trading 1,000 points or over 6 per cent lower, while the benchmark index in Hong Kong slumped 500 points or 2.5 per cent. According to futures trading, Wall Street is likely to suffer huge losses if UK votes in favour of Brexit. The S&P500 futures in the US traded 3 per cent lower, indicating sharp selloff in US markets. Meanwhile, gold prices rallied over 3 per cent, as investors exited risk assets in favour of safe haven instruments. Oil prices were down 2 per cent. Other commodities such as copper also traded lower.