Black Friday: Sensex tanks 605 points as Brexit becomes reality

NEW DELHI: Investors on Dalal Street had that sinking feeling all through Friday as Brexit became a reality, singeing equity markets the world over.

In a historic referendum, the United Kingdom voted to leave the European Union, thereby becoming the first country of the pack to do so. The shock results sent equity markets tumbling from London to Tokyo as investors became risk averse.

The S&P BSE Sensex tumbled 1,095 points in intraday trade, but pared some of the losses to end the day at 26,398, down 2.24 per cent or 602 points. The 50-share Nifty50 closed at 8,089, slipping 2.20 per cent, or 182 points.

“This event is likely to have a destructive impact on international trade and currency markets, especially in Europe and the UK. Though the Indian economy is unlikely to have any major direct impact, it will certainly influence flow of liquidity to emerging markets like India amid such chaos,” said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

Tata Motors was the biggest laggard on the BSE benchmark, ending 8.25 per cent lower, as investors feared that Jaguar Land Rover profit may plummet post Britain’s exit from the EU. JLR contributes 80 per cent to Tata Motors’ profit.

Group company, Tata Steel, also suffered the wrath of investors and the stock closed 6.61 per cent down. The company said it had signed a memorandum of understanding with Thyssenkrupp for merger of its European steel business.

The Brexit verdict led to unprecedented turmoil in the currency market with the pound hitting levels last seen in 1985. The rupee plummeted as much as 85 paise during the session to trade at 67.87 to the dollar, down 63 paise, at the time of writing of this report.

All sectoral indices closed with deep losses, with the BSE Realty index emerging the biggest laggard, down 3.74 per cent, as investors chose to sell risky, high-beta stocks. Other losers included BSE Industrials (3.62 per cent), BSE Capital Goods ( 3.30 per cent) and BSE Metals (3.59 per cent).

Elsewhere in Asia, markets nosedived post the EU referendum outcome. Japan’s Nikkei plunged 1286 points as the yen surged to its highest level since 2013. Hong Kong’s Hang Seng closed 614 points lower while China’s Shanghai Composite shed 1.36 per cent.

European markets experienced the biggest crash in their history with the German DAX slumping 7 per cent, French CAC40 8.21 per cent and the pan-European Euro Stoxx50 8.80 per cent.

Gold jumped to highest level in two years, hitting a high of $1,362 in international markets. The yellow metal benefitted from risk-off sentiments and was trading 4.64 per cent higher at $1,334.

“These uncertainties now pose a real risk as people stand up against the political comfort if the UK exit vote is anything to go by. Given the large uncertainties, allocation to gold becomes extremely important,” said Chirag Mehta, Senior Fund Manager-Alternative Investments, Quantum AMC.