What will the consequences of Brexit be for India? It’s easy to think of apocalyptic scenarios, as the odds of an unravelling of the European Union (EU) and the euro, which were always considerable, have increased sharply. Brexit could just be the beginning of the end for Europe, as George Soros has said.

Uncertainty and risk aversion will rise. Capital flows will be in jeopardy and competitive currency devaluations more likely. World economic growth, which was anyway sputtering, will be further dampened. Politically, Brexit may be seen as a blow against globalization, which could be further reinforced by a Trump victory in the US presidential election.

But that is a doomsday scenario. Governments and central banks won’t be sitting back idly. Central banks will flood the markets with money. The centre in Europe might rally against the threat from the far-right. The US won’t raise rates. It is unlikely that either the UK or the EU will retreat into protectionism.

Nobody knows how it will all pan out. But some things are certain: a) The risks have increased; b) The outlook for global growth has gotten worse; c) European leaders haven’t covered themselves in glory in the way they have handled the continent’s problems; d) with interest rates at rock bottom, some of them even negative, there is a limit to how much further stimulus central banks in developed markets can give their economies; and e) as Reserve Bank of India (RBI) governor Raghuram Rajan warned long ago, “We are in the midst of an age of competitive devaluation and beggar-thy-neighbour policy. When elephants fight, the grass suffers." It’s best to keep a wary eye on the yuan. (Also read: Britain votes for Brexit in historic rupture of postwar order)

Listed below are some of the ways India may suffer:

Currency

Brexit adds significantly to pressures on the rupee. While the rupee has depreciated by a lower extent against the US dollar compared to other emerging market currencies, that could well be owing to RBI’s intervention to stem volatility.

Brexit affects the rupee through both trade and the financial channels. The UK and European Union account for 23.7% of the rupee’s effective exchange rate, according to Nomura Research calculations. The UK’s exit could lead to a prolonged period of risk aversion in the equity markets which could spark foreign portfolio investor outflows and add to the rupee’s weakness.

While on the positive side, Brexit has driven away fears of a US Fed rate hike and could lead to lower commodity prices, there is a side effect: it could open more room for RBI to cut rates, which won’t be a positive for the rupee.

These troubles will be accentuated by the market’s uncertainty over who will be replacing governor Rajan. Note also that the dollar outflow on account of FCNR deposits of about $20 billion will simply add to pressure on the rupee.

Equities

Although there was a lot of talk of Brexit, investors had largely been betting that UK will vote to remain in the EU. One-week returns of the MSCI UK and MSCI Europe indices stood at 6.6% and 6.7% at the end of trading on Thursday. Clearly, the vote to exit EU came as a surprise, which explains the sharp drop in risk assets.

The MSCI India index, too, has done well lately—boasting a 15% return from its lows in February this year in local currency, outperforming other emerging markets in Asia. In this backdrop, Indian stocks did relatively well to retreat by only around 2% on Friday, more or less in line with some other Asian markets such as Korea and Taiwan. (Also read: Brexit upends global markets as stocks, pound plunge; yen soars)

For now, investors seem to be betting that Indian companies won’t be affected much, In fact, some market experts point to the sharp drop in oil and other commodity prices and say that a number of companies will benefit as a result. S. Naren, chief investment officer at ICICI Prudential Asset Management Co. Ltd, says that the monsoon is a far more important factor for the markets.

Be that as it may, whenever investors get into a risk-off mode, Indian equities suffer. Analysts at Deutsche Bank AG wrote in a note to clients, “A heightened level of financial market volatility and uncertainty over the outlook for currencies and global macro will undermine equity markets—including India."

To be sure, foreign institutional investors (FII) have already retreated a bit since mid-June. Yogesh Radke, head of quantitative research at Edelweiss Securities Ltd, says that FII net long positions in the index futures market amounted to 13,600 crore on 10 June, the highest since March 2015. But by Thursday, these had been trimmed to 7,000 crore. Some of this could be the impact of the so-called Rexit (the decision of Rajan to step down from the central bank). With Brexit becoming a reality in a week’s time, it is becoming one too many an exit for investors.

Commodities

The recovery in commodity prices in recent months has hit a bump with Brexit. Since 1 January, the Bloomberg Commodity Index was up by 13.4% as of 23 June, with Brent crude up by 37%, S&P GSCI Agriculture Index up by 14%, and the Bloomberg Industrial Metals Index up by 9.5%. On 24 June, these were down by varying degrees, with crude oil suffering a 5.2% decline while the Bloomberg Commodity Index was down by 1.4% at the time of writing.

The immediate impact of Brexit has seen the US dollar appreciate and this usually sees commodities with strong links to financial markets weaken. Since money gravitates towards the appreciating dollar, commodities take a back seat.

Government and central bankers in the EU may counter with measures to prevent the adverse effects of Brexit. The US Federal Reserve may do its bit by postponing further rate hikes. These developments will further influence currency movements and, in turn, influence commodity prices. There is the effect on the real economy as well. The UK’s exit raises concerns that its economy may weaken, which in turn can affect demand for commodities. The EU economy too may be affected. This region is one of the largest producers and consumers of several commodities.

Brexit has become a new worry for commodity producers, coming on top of concerns about China’s slowing economic growth. If news flows from both these sources continue to cloud the outlook for commodities, then prices may turn weak. Brexit’s impact will then be a fateful one for commodity producers and producing nations.

Bonds

Bonds have remained surprisingly resistant to the carnage unleashed by Brexit on equity and currency markets. Indeed, 10-year government security yields have gone down by half a basis point. The market is likely to take a more sanguine view of Brexit because of several reasons. One, it has opened up the prospects of more monetary accommodation in India and the rest of the world. Two, slower global growth will feed into lower commodity prices and help keep inflation down in India, another factor which will help RBI cut rates. Of course, the uncertainty over a new RBI chief and the sustained fall in the rupee will weigh on sentiment. But then, foreign fund flows don’t matter all that much for Indian bonds and, on balance, bond market experts don’t see any significant foreign investor inflows or outflows from bonds.

Gold

Naturally, investors sought refuge in gold, a safe-haven asset. Gold prices in India shot up as much as 6% on Friday and 4.2% versus the US dollar. At one point, it was up as much as 8.1%, the biggest rally since 2008. The outlook is bullish for the yellow metal in a period of likely prolonged uncertainty as other European countries might be tempted to follow the UK. The chances that the US will hike rates before December have also declined to near zero, which is another boost for gold prices (since rate hikes increase the opportunity cost of holding the metal).

Companies

Currency volatility will straightaway hurt revenue and profits for some of those doing business with the UK and Europe. Analysts may have gauged some of this already. But then the big picture that is more material in the longer run is that Britain’s exit may affect easy access and movement of goods across unified Europe. The actual impact depends on what kind of a trade agreement is drawn up to replace the existing free market access. Reports say that EU trade agreements with other nations will cease to apply to Britain, which will have to renegotiate with each country in its own capacity.

Here are some sectors that would be impacted by Brexit and stocks that fell in Friday’s trading session.

Auto and auto components

The BSE auto index was badly affected. Tata Motors Ltd fell the most, losing 8%. Over 90% of its annual profit comes from the subsidiary Jaguar Land Rover Plc., which sells about a third of its cars in the UK and Europe. Analysts say a region-wise break up shows that it is a net importer with Europe (JLR imports auto parts from Europe). That said, a part of this may be offset by its exports to China, which will become more remunerative as the pound depreciates against the dollar. Further, there will be new concerns of trade barriers/import duties levied on JLR vehicles to Europe as they try to make their local auto firms like Mercedes, Audi and the like, more competitive. (Also read: Brexit forces Tata group to review UK business strategy)

Maruti Suzuki India Ltd’s shares fell by 2.25%, as it will suffer the indirect impact of Brexit. The 10% appreciation of the Japanese yen, could lead to a 8-9% downgrade in fiscal year 2017 earnings.

Meanwhile, shares of Motherson Sumi Systems Ltd fell the most (8.48%) among component firms. Europe comprises over half its revenue, with plants across the UK and EU. But the stock could recover as risks are minimal unless trade agreements between nations affect the price competitiveness of its products.

IT companies

Predictably, information technology (IT) companies with the largest exposure to the UK and Europe fell the most on Friday. Tech Mahindra Ltd and HCL Technologies Ltd, which get about 30% of revenue from Europe, fell sharply. But it’s not clear whether these companies will lose or gain as a result of the UK referendum. According to an analyst with a multinational brokerage, “It’s too early to say how things will play out—for all one knows, Brexit could lead to increased outsourcing work." One thing’s for sure, though: the global economy is expected to be hit as a result of UK’s decision to leave the EU, and this is bad news for all IT companies.

Metals

Tata Steel Ltd’s stock plummeted by 6.37%, the biggest loser among metals that will face the direct wrath of Brexit. The EU accounted for 57.5% of its revenue in FY16. The sizeable foreign currency debt on its books adds currency risk too.

It is not alone. Hindalco Industries Ltd’s shares were down by 5.17%. It has a direct and substantial exposure to the EU via its subsidiary Novelis Inc, which makes value-added aluminium products.

Then, there are those firms that may suffer an indirect impact, such as Vedanta Ltd, Steel Authority of India Ltd, JSW Steel Ltd and Hindustan Zinc Ltd. Worries on the Street will increase if Brexit causes a slide in metal prices. Some risk also exists as the dollar’s strengthening could see the prices of popularly traded metals in financial markets, such as copper, aluminium and zinc, take a beating.

Oil

Brent crude oil too has fallen sharply. Lower crude oil prices are positive for Indian economy considering its huge import requirements. However, if pressure on prices persists, then the anticipated inventory gains for June quarter for state-run refining and marketing companies such as Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd and Indian Oil Corp. Ltd will be lower than expected.

At the same time, lower crude oil price is obviously negative for oil producers such as Oil and Natural Gas Corp. Ltd (ONGC), Oil India Ltd and Cairn India Ltd. Analysts expect a strong dollar versus the Indian rupee to be positive for Reliance Industries Ltd (RIL) earnings.

Aviation

Lower crude oil prices should benefit the aviation sector in general, as fuel costs account for a good portion of operating costs. But Jet Airways (India) Ltd stock plummeted. With 60% of its capacity (Q4FY16) deployed on international routes, the concern is about Brexit denting travel demand, due to weaker currencies and any economic slowdown in the UK or Europe, at least in the near term.

Pharmaceuticals

The impact may be minimal for most pharma firms as the US is their bigger market, not Europe, after which comes India.

Of the listed pack, Aurobindo Pharma Ltd gets 28% of its sales from Europe. Others in a similar boat are Glenmark Pharmaceuticals Ltd, Wockhardt Ltd and Divi’s Laboratories Ltd.

Apart from the currency volatility that will have a bearing on company financials, trade agreements between countries and whether the UK would now have a set of separate regulatory approvals, even if EU approvals are in place, have given rise to uncertainties.

Infrastructure

One cannot ignore the drop in Larsen and Toubro Ltd’s stock. Yes, the country’s largest infrastructure player has no exposure to projects in the EU. But analysts fear that cost of borrowing for companies may increase due to volatile currency movements in the near to medium term.

Among the capital goods multinational corporations, Cummins India Ltd exports to Europe through the UK. Analysts say they would have to see how things pan out, as the parent firm will have to perhaps rework its strategy on exports from India.

The writer does not own shares in the above-mentioned companies.

Close