Key benchmark indices slumped in early trade as early results from the "Brexit" referendum surprised investors and sent them rushing back to haven assets. At 9:20 IST, the barometer index, the S&P BSE Sensex, was down 810.43 points or 3% at 26,191.79. The Nifty 50 index was down 282.15 points or 3.41% at 7,988.30.
The broad market depicted weakness. There were almost 22 losers against every gainer on BSE. 1,174 shares fell and 52 shares rose. A total of 23 shares were unchanged. The BSE Mid-Cap index was currently down 3.38%. The BSE Small-Cap index was currently down 3.75%. The decline in both these indices was higher than the Sensex's decline in percentage terms.
The UK's vote on whether the country should stay in or leave the European Union (EU) is quickly becoming a make or break event for global markets. Global markets had initially reacted positively as voting came to a close. British referendum to determine whether the UK remains a member of the EU is dubbed Brexit. Voting in the referendum closed at 10 p.m. London time yesterday, 23 June 2016. Early voting returns suggested UK was on the brink of leaving the EU, threatening the existence of the entire bloc and its single currency. Early official results showed the margins were tight but pointing to a "leave".
In the overseas market, Asian markets tumbled today, 24 June 2016, as investors reacted nervously to early results from the UK referendum on whether to leave the EU. A stronger showing by the "leave" vote triggered selling of shares in companies that have strong business ties with the UK. In the foreign exchange market, the yen -- considered a safe-haven currency -- strengthened to 103 against the dollar on fears of a looming Brexit.
US stocks closed higher yesterday, 23 June 2016, with all three indexes rallying, as investors wagered that the UK will choose to remain in the EU in a historic referendum.
Sun Pharmaceutical Industries was down 0.67%. The company announced after market hours yesterday, 23 June 2016, that its board approved buyback of the company's equity shares. The company will buyback 75 lakh shares from the public at a price of Rs 900 each. The buyback price is 19.73% above the company's last traded price of Rs.751.70 on the BSE. The company said that the buyback aims to return surplus funds to shareholders and enhance overall returns for them. The record date for the buyback is 15 July 2016. Under Securities and Exchange Board of India (Sebi) guidelines, 15% of the buyback offer is reserved for small investors holding shares worth not more than Rs 2 lakh as on the record date.
State Bank of India (SBI) was down 3.61%. The bank announced after market hours yesterday, 23 June 2016, that a meeting of the executive committee of the central board of the bank is scheduled to be held on 29 June 2016 at Mumbai. The committee will examine the status and decide on long term fund raising in single/multiple tranches up to $1500 million through a public offer and/or private placement of senior unsecured notes in US Dollar or any other convertible currency during the financial year 2016-2017.
Car major Maruti Suzuki India lost 4.34% as the Japanese yen strengthened against the dollar. The Japanese yen surged against the dollar on global risk aversion generated by Brexit fears. The Japanese currency is perceived as a haven in times of global financial and global economic worries.
A strong yen adversely impacts Maruti Suzuki India's (Maruti) operating profit margin. Maruti pays royalty to its Japanese parent Suzuki Motor Corporation in yen terms for some of its earlier models. Maruti has reportedly started paying royalty to its Japanese parent in rupee terms on all new models from 1 April 2016. Maruti also has an exposure to the yen to the extent it imports raw materials from Japan.
Tata Motors was down 7.30% and Tata Steel was down 5.95% ahead of the Brexit referendum outcome. Both Tata Steel and Tata Motors have large operations in UK and Europe. Tata Motors derives majority of its revenue from its British luxury car unit Jaguar Land Rover (JLR). JLR is the largest automotive manufacturer in Britain. It is one of the UK's largest exporters and generates over 80% of its revenue from exports.
Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe. Tata Steel Europe has initiated the process to sell its UK business viz. Tata Steel UK. Tata Steel Europe has invited seven short listed potential investors to submit binding bids for Tata Steel UK.
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