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Brexit may affect us later

Short-term volatility is not ruled out, not even in India where the stock markets displayed a more sanguine sentiment.

In the Brexit aftermath, which initially threatened to snowball into a free fall in global markets, there were incipient signs of saner thinking emerging after the knee-jerk reaction led to a bloodbath on Black Friday and the Manic Monday that followed. The bigger worry would have been risk aversion taking hold across all asset classes as sentiment is a more important market mover than economic projections of the fallout of the biggest event in the free world in years. That may have been staved off for the moment.

While the long-term effects cannot be forecast yet, even as the fear of Britain slipping into recession stalks the island and more referendums and exits threaten the EU, a measure of containment is already evident in the differential movement of the prices of gold and oil and the sentiment in the bond market, besides the “casino” bourses which in precipitous early falls highlighted the panic.

Short-term volatility is not ruled out, not even in India where the stock markets displayed a more sanguine sentiment. While Brexit’s immediate impact has been the least in India and the direct trade impact on the rupee may be limited even in the long run, global cues will weigh heavily on a market so dependent on foreign portfolio investors for impetus and big volumes to shape trade and sentiment. The scare scenario may have been vastly exaggerated in the short term but, realistically seen, the long run is not going to be a smooth curve for India.

( Source : Deccan Chronicle. )
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