Indian markets have all the reasons to rejoice especially with monsoon touching Indian soils and the government hinting that it will clear the GST Bill in the monsoon session of the parliament. However, there is anxiety in the Indian markets.
Financial markets globally are looking at the next big vote. We are not referring to the US elections but the referendum that is expected in the UK over the country possible exit from the Euro zone. Market pundits and country heads have been warning the UK against voting for an exit from the zone.
Post the financial crisis in 2008, Britain’s exit from the zone, coined as Brexit, is the next big event that is likely to severely impact markets globally.
Britain is not a member of the common currency in the Euro zone but belongs to the Euro Union which allows the country certain benefits which come at a cost. The two sides – those who want Britain to stay in the Union and those who want ‘freedom’ – highlight the advantages and disadvantages of Brexit to suit their purposes.
Economists, worldwide feel that a Brexit will result in a course correction in an already fragile global environment. Britain will face higher unemployment as companies in the country, which are enjoying preferential treatment for selling their goods in Europe, may relocate to member countries of the Euro zone.
There is a bigger problem from Brexit and that is of fallout of similar demands in other countries. Scenes of unrest just ahead of the Euro 2016 matches have been seen in France. Political parties in France are talking of a similar exit from the European Union and more freedom of choice to the French people.
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Handling of the immigrant situation in various European countries has acted as a fuel to the unrest. Recent polls by PEW Research Center show that an overwhelming majority are unhappy with the Euro Unions handling of refugees. Euro scepticism beyond Brexit is the potential fear which can rock the Euro zone and thus the world order.
The fact that Britain was expected to vote on June 23, 2016 was known for some time, but markets are getting jittery as the date approaches. The British public seem to be evenly divided on the Brexit vote. But the reason for the anxiety is the recent poll which suggested that those supporting an exit of Britain from the Euro Zone are more likely to turn up to vote.
In her recent address Janet Yellen, chairwoman of Federal Reserve, said that the upcoming referendum in the UK vote to exit the Union could have significant economic repercussions. Yellen herself has added to the anxiety in the market, saying that she favours a gradual rise in US rates, but refused to give a timeline.
Indian markets no doubt are waiting for cues from these two global events as investors are holding on to their wallets and prefer to wait for the event to unfold. Markets are expected to continue to remain volatile in such a scenario.