Britain's decision to opt out of the European Union-EU (Brexit) rattled Indian financial markets on Friday, shaving some over 1,000 points, or 4%, off Sensex, a key equities index, while pulling the rupee below the $68 mark. The British pound dropped 11% to its lowest level in over three decades as the market awoke to the shock of Brexit. The euro, seen to be vulnerable if Britain voted to leave the EU, was also down 3.2% against the US dollar, which also rose strongly against emerging market currencies. A stunning slide in sterling at 3.40am (London) saw the currency plummet below $1.40, and 20 minutes later, it had breached $1.35 to levels last seen in 1985. An hour later, the pound touched a new low at $1.3224. Following the poll results, British Prime Minister David Cameron announced his desire to resign from the post.
The BSE Sensex, which had closed on Thursday at 27,002, opened the next morning at 26,367. At noon, it had drifted sharply and was ruling at 26,002 points, down by 999 points, or 3.7%. At one point, it had lost nearly 1,050 points.
Each of the 30 stocks that go into the Sensex basket were in the red led by Tata Motors, which was down as much as 11.53% and Tata Steel, lower by 9.15%, due to their large presence in Europe in general and Britain in particular.
In the pre-open trades, the 30-scrip index was down as much as 634.74-points or 2.35%. An indication came from the SGX Nifty, which trades on the Singapore exchange and ahead of the opening bell in India, was down over 2.75%.
At the National Stock Exchange (NSE), where the 50-scrip Nifty had closed at 8,270 points, the opening bell was at 8,029. Thereafter, the index was ruling below the 8,000-points mark at 7,955 points, down 315 points, or 3.81%.
The rupee dived over 1.4% to 68.21 per US dollar, while the British pound -- that had rallied to nearly $1.5 in early trades -- fell sharply to its lowest level since 1985 at $1.35.
Both Finance Minister Arun Jaitley and Reserve Bank of India (RBI) Governor Dr Raghuram Rajan sought to calm the markets and assured there was no cause for panic as India's economic fundamentals remained strong and along with other macro indicators.
RBI's Rajan said investors need not panic over the rupee. "We are comfortable on foreign exchange reserves. We can use it when necessary," he added. "We also expect to see lesser swings in bond markets compared to peers."
Commenting on the Brexit, Arundhati Bhattacharya, Chairman of State Bank of India (SBI), the country's largest lender, said, "Uncertainty of any sort results in volatility and Brexit will be no exception. As risk aversion sets in, there would be a decline in financial markets and India would see this impact along with other nations. However as trade strategies are reworked there could be potential advantages in the form of better market access for India to EU and UK."
On Thursday, sensing that the chances of Britain remaining in the EU were higher, the investor mood had lifted the Sensex by 236.57 points or 0.88% while the wider 51-scrip Nifty edged up by 66.75 points or 0.81%.
This, despite foreign funds being net sellers of Indian equities on Thursday valued of Rs31.86 crore, as per data with the National Securities Depository Ltd (NSDL).
World reacts as Britain votes to leave EU
British PM Cameron, said he fought the referendum on the EU with "head and heart" and was proud of what he had done. "I formed a coalition, delivered a referendum in Scotland and gave the public a referendum on Europe. I have fought the referendum with head and heart. I always thought that one has to confront big decisions and not duck them," Cameron said as he announced his decision to step down as the Prime Minister.
International reactions poured in on Friday for the dramatic decision by British voters to leave the EU in a historic referendum.
"We respect the result. Now is the time for us to behave seriously and responsibly. (Prime Minister) David Cameron has his responsibilities for his country, we have our responsibilities for the future of the EU. You can see what is happening to sterling on the markets. I don't want the same thing to happen to the euro," European Parliament President Martin Schulz said early Friday morning after the results were announced.
Former First Minister and Scottish National party leader Alex Salmond said he believes Scotland must now stage a second independence referendum before the UKA’s exit from the EU is effected within the next two years.
Dutch Freedom Party leader Geert Wilders hailed the decision and said that it was the time for a referendum in the Netherlands.
"Hurrah for the British! Now it is our turn. Time for a Dutch referendum!" he tweeted
Marine Le Pen, the leader of France’s far-right Front National party, has welcomed the result. She said she also wants a similar referendum in France.
"From #Brexit to #Frexit: It's now time to import democracy to our country. The French must have the right to choose!" she leader tweeted.
Manfred Weber, leader of the largest group in the European Parliament, the EPP, said: "Exit negotiations should be concluded within 2 years at max. There cannot be any special treatment. Leave means leave."
German Foreign Minister Frank-Walter Steinmeier deemed it as a sad day for Britain and for the EU.
The head of Germany's Foreign Trade Association, Anton Boerner, said: "That is a catastrophic result for Britain and also for Europe and Germany, especially the German economy. It is disturbing that the oldest democracy in the world turns its back on us."
Gerard Araud, the French ambassador in Washington, tweeted: "Now to the other member states to save the EU from unravelling which excludes business as usual, especially in Brussels. Reform or die!"
The 'Leave' campaign won by 52% to 48% with England and Wales voting strongly for Brexit, while London, Scotland and Northern Ireland backed staying in the EU.
The referendum was held all across the country on Thursday. The turnout was 71.8% - with more than 30 million people voting.
Twitterati reaction on #Brexit
First, UK has no idea what's going to happen in future. This gives more ammo to SNP to break free from UK and join EU. Without Scottish oil money, Great Britain and Wales will be bust; it has only London to keep afloat. Also, UK will now have to spend a lot more to protect its borders, previously outsourced to Turkey (which ironically not part of EU), Greece and Germany. This is going to be a very very very very very difficult tasks. UK is no America.
Second, EU required reforms way before Brexit happened. This is just a wake up call, or an inflection point if you will. Some smart guys in ECB and EU are now talking of reforms. Yeah. Right.
It's going to be a long sideways market (or a good chance of prolonged stagnation/recession), at least for European markets. Some FIIs may even come here. I don't know. Gold? Yen? Even real estate? They're all looking good now.
Other countries may follow UK, but they are smaller and have less economic clout. They can't afford to leave EU. There will be lots of politics and infighting between right-wing parties and the mainstream. It will be theatre, literally. I can't wait for the circus to start.
Times are a'changing!
Brexit will not disturb trajectories of world events beyond a hiccup and a ripple or two.
Somebody who runs the stochastic processes in Langley must have finally briefed Obama with the foundation of the US-UK special relationship. It was Bush crony Blair who sank the commonwealth by defining the United Kingdom's aspiration. The UK hoped and prayed, with cap in hand, to be a bridge between the US and Europe. This paid rich dividends by taking NATO into committing war crimes in Iraq at the behest of the White House's Sunni Pay Masters. This also established that the UK was a willing slave. The UK was the convenient handle with which to swing the European pan, A tail with which to wag the European dog and which could be treated like a Yazidi. Remember how the US abandoned the UK over the Falklands? If the UK exits Europe, it would reduce the time required for the rest of Europe to integrate with Russia which, bereft of Totalitarian Communism, is Europe's natural partner rather than an entirely selfish and uncultured United States that imposes laws and Islam on others that it will never impose on itself.
The Pound will not crash. U.K. will be temporarily "ostracized" by both the US and EU. Britain will work harder on its Financial Services and Financial Safe Haven status which is the source of most of its "invisible" earnings which is the major portion of its exports. In this process, UK will move towards an equidistant locus from both East and West. But it will not be able to revive the moribund Commonwealth in any way other than as a safe haven for its corrupt tyrants. It will become a third rate military power depending on its insularity for security from all but Islam which will dominate its cultural transformation via the Islamic portions of the Commonwealth that will continue to use Britain as Britain seeks, futilely, to use them. This will render Britain's far flung territories such as The Falklands (Malvinas) more vulnerable to subsidence into their original main land parents.
In any case, the only thing that unites Britain and the EU is that they are both ruledby political correctness, Islamophilia, and the angst of small town shopkeepers, small farmers, and lower middle class housewives without any conception of Geo Politics, Military necessity, History, or Economics. These churn out the plethora of strangulating and suffocating laws that are driven like any vice by compulsion rather than necessity. Which is what separates them as notions of political correctness obtrude into notions of sovereignty as well.