Mumbai, June 24 (IANS) Britain’s decision to opt out of the European Union (Brexit) rattled Indian financial markets on Friday, shaving some over 1,000 points, or 4 per cent, off a key equities index, while pulling the rupee below the $68 mark.
Both Finance Minister Arun Jaitley and Reserve Bank of India Governor Raghuram Rajan sought to calm the markets and assured there was no cause for panic as India’s economic fundamentals remained strong and along with other macro indicators.
The sensitive index (Sensex) of the BSE, which had closed on Thursday at 27,002.22 points, opened the next morning at 26,367.48 points. At noon, it had drifted sharply and was ruling at 26,002.50 points, down 999.72 points, or 3.70 per cent. At one point, it had lost nearly 1,050 points.
Each of the 30 stocks that go into the Sensex basket were in the red led by Tata Motors, which was down as much as 11.53 per cent and Tata Steel, lower by 9.15 per cent, due to their large presence in Europe in general and Britain in particular.
In the pre-open trades, the 30-scrip index was down as much as 634.74-points or 2.35 per cent. An indication came from the SGX Nifty, which trades on the Singapore exchange and ahead of the opening bell in India, was down over 2.75 per cent.
At the National Stock Exchange (NSE), where the 51-scrip Nifty had closed at 8,270.45 points, the opening bell was at 8,029.10 points. Thereafter, the index was ruling below the 8,000-points mark at 7,955.35 points, down 315.10 points, or 3.81 per cent.The rupee dived over 1.4 per cent to 68.21 per dollar, while the British pound — that had rallied to nearly $1.5 in early trades — fell sharply to its lowest level since 1985 at $1.35.
But India’s finance ministry said there was no cause for alarm.
“We are well prepared to deal with the short and medium term Brexit consequence — strongly committed to our macro-economic framework with focus on stability,” Finance Minister Arun Jaitley tweeted from Beijing.
“Our macro-economic fundamentals are sound with a very comfortable external position, solid commitment to fiscal discipline and declining inflation,” he said.
“The government and the Reserve Bank of India as well as other regulators are well prepared and working closely together to deal with any short term volatility. Our aim will be to smooth this volatility, minimize its impact on economy in short term. For the medium term, we will pursue our reforms agenda.”
Reserve Bank Governor Rajan said investors need not panic over the rupee. “We are comfortable on foreign exchange reserves. We can use it when necessary,” he added. “We also expect to see lesser swings in bond markets compared to peers.”
On Thursday, sensing that the chances of Britain remaining in the EU were higher, the investor mood had lifted the Sensex by 236.57 points or 0.88 per cent, while the wider 51-scrip Nifty edged up by 66.75 points or 0.81 per cent.
This, despite foreign funds being net sellers of Indian equities on Thursday valued of Rs 31.86 crore ($4.72 million), as per data with the National National Securities Depository Limited.
For months, the global stocks, currency and commodity markets have been on the edge over how Britons will vote on whether or not to remain a member of the European Commission, which the nation had joined in 1973.
The global investor, though, was been in favour of continuity.