The verdict is out

“While businesses wait to see how the mechanics of exiting the EU will actually be implemented, they may hold off on new investment, especially if that new investment is contingent on Europe’s economic outlook and if European aggregate demand is negatively impacted,” economists at HSBC opined referring to Asia.

With the volatility in financial markets unlikely to die down in a hurry, Hitendra Dave, head, Global Banking & Markets, (India) HSBC, believes the rupee will stabilise as and when the world markets settle down. “However, investors will differentiate between markets and the impact on India’ s capital flows may not be that severe,” Dave observed.

In the offshore market, the one-month non-deliverable forward (NDF) was trading at 68.43 to the dollar, down 1.12%. Currency expert Jamal Mecklai observed the uncertainty in financial markets was likely to persist given how the EC could see a shakeout with more members leaving and new ones coming in. “We’re perched on the edge of a new world,” Mecklai said. The rupee should, however, manage to remain relatively stable compared to its peers, he added, pointing out a lower value for the rupee might not be such a bad thing at a time when currencies of competing nations are weakening.

Currency expert AV Rajwade said the appointment of a new governor was adding to the uncertainty. "Till we know about the new governors we have a vacuum of sorts and it is hard to predict a level for the rupee," Rajwade observed.

Andrew Holland, CEO, Ambit Investment Advisors, believes the UK exiting the EU might have far reaching effects on the world economy, including that of India's, and it was way too early to gauge them accurately. "It's a huge negative shock. The ramifications are far reaching. Globally, central banks are dictating policies and people are tired. The fear now is that Europe could disintegrate ," he observed.