Commodity brokers worry as clients' bets go wrong in opening

Business standard has posted by Commodity brokers worry as clients' bets go wrong in opening Early indications indicating a win with a marginal difference for the ‘Leave’ vote for Britain has created a situation where many traders’ positions could go wrong. Current trends suggest Britain may exit the European Union, leading to gold rising 5.6% to trade at $1335 over yesterday's close and dollar rupee down below 68 or 1.4%. 

This means gold on MCX will open in higher circuit or hit high circuit of 6% in opening. Margin cover with brokers for precious metals is usually 6% and hence when circuit opens after a breathing period, if additional margin is not deposited, exchanges most likely to block brokers' terminals if they can't cough up additional margins. 

Silver is up 4.5% to $ 18.4er ounce.

On MCX Thursday night, gold closed at Rs.29914 per 10 gram and silver closed Rs.41190 per kg. Gold could open Rs 1,000 higher. Over the past few days, the sentiment in Britain seemed to be turning to ‘Remain’ in EU, which prompted traders in India to go short in gold and long in oil and metals. All bets could go wrong. 

Brent crude was down over 6% to $47.6 and other metals were also down 2-4%. Hence commodity traders could see losses in opening. 

Ajay Kedia, director Kedia commodities said while final results are yet to be out and reports suggest urban vote counting is yet to be known and in case of very close result where difference is in decimal points, that could create dilemmas for decision makers. Still if trend continues they way initial indicators suggest than it is time to remain cautious for market players.

SEBI officials have said they have already asked their exchanges to remain alert and put its own surveillance mechanism on high alert to handle any unforeseen eventualities. 

India focusing on market dislocations from Brexit, says Jayant Sinha

Business standard has Posted by India focusing on market dislocations from Brexit, says Jayant Sinha India is focusing on the market dislocations arising from a likely British referendum vote to leave the European Union, junior finance minister Jayant Sinha said on Friday, saying it was too early to assess the trade impact.

"There's going to be market dislocation and we are going to have to focus on that," Sinha told news channel ET Now in the first official comment on the UK plebiscite.

India's benchmark stock indexes opened down 3%. Listed companies with exposure to Britain suffered the heaviest losses with Tata Motors tanking nearly 10%.

Sensex slumps 1,000 points as Brexit fears emerge; Nifty below 7,950

Business standard has Posted by Sensex slumps 1,000 points as Brexit fears emerge; Nifty below 7,950 At 10:30 am, the S&P BSE Sensex lost 1034 points to quote at 25,968 and the Nifty50 shed 328 points to trade at 7,942. In the broader market, BSE Midcap and Smallcap indices are trading lower by over 3 % each in line with the larger counterparts.

"Market has breached 8,000 levels and once the event is out of the way so any recovery one should reduce position as 7,500 could be on cards," said AK Prabhakar, head-research, IDBI Capital.

ALSO READ: Investors lose over Rs 3 lakh crore as Sensex tanks nearly 1,000 points

The Indian rupee lost 1% in opening trade on early trends that Britain would leave the European Union following a nationwide referendum.

The rupee opened at 67.88 a dollar, from its previous close of 67.25 a dollar, but fell to 68 a dollar within a few minutes of opening trade,  not very far from its lifetime low of 68.85 a dollar reached on 28 August 2013. At 9.17, rupee was trading at 68.18 a dollar.

ALSO READ: India ready to deal with EU referendum

"As good deal of negativity may have been priced in at open, potential for value buying or a bounce back, is higher than the potential for extended downside. With only a few stocks have significant exposure to EU/UK, the impact on Indian stocks may not be en masse, with strong domestic cues in the backdrop. However, companies that have exposure to yen could see significant volatility. Rupee is likely to weaken against US Dollar, as the greenback is expected to see demand as a safe haven currency in the Brexit backdrop. But with forex reserves near record peaks, and with recent instances of RBI stepping in to arrest volatility, rupee is less expected to weaken much beyond 68," says Anand James, Chief Investment Strategist, Geojit BNP Paribas.

Meanwhile, as gold at the highest level since July 14, 2015 as official results so far from a British referendum pointed to a victory for a campaign to exit the European Union.

ALSO READ: Rupee crosses 68, loses more than 1% on Brexit trends

GLOBAL MARKETS

Asian markets pared early gains and turned negative after investors turned sellers after initial results of the EU referendum indicated probability of Britain leaving the European Union compared to the earlier opinion poll predictions of 'remain'. Shares in Japan were the top losers with the Nikkei down over 3% while the Shanghai Composite was down 0.6%. Shares in Hong Kong were also sharply lower with the Hang Seng down nearly 3% while the Straits Times eased nearly 1%.

US stocks ended over 1% higher on Thursday after opinion polls indicated that the Britain is most likely to remain a member of the European Union. The Down Jones industrial average ended up 1.3% at 18,011, the S&P 500 ended up 1.3% at 2,113 and Nasdaq Composite ended up 1.6% at 4,910.

ALSO READ: Brexit: Britain votes to 'leave' EU in historic divorce, reports BBC

US stock futures plunged, as results of the UK referendum on European Union membership pointed toward a vote to leave the bloc after more than four decades of membership, fanning speculation that a divided Europe would put another brake on already fragile global growth. S&P 500 Index contracts slumped 4.9%, joining losses in equity futures in the UK.

ALSO READ: Pound collapses to lowest since 1985 on Brexit shock

BREXIT LINKED STOCKS

Metal companies like Tata Steel and Hindalco, auto majors such as Tata Motors, Motherson Sumi, IT companies like TCS, Tech Mahindra, HCL Tech and Pharma companies like Lupin, Dr Reddy’s Laboratories are likely to get impacted the most in case Britain decides to leave European Union (EU). Tata Motors cracked 8%, Tata Steel slumped 61%, Hindalco lost 4%, Motherson Sumi lost 9%, Lupin and Dr Reddy’s Lab lost 2% and 1.3% respectively.

ALSO READ: Commodity brokers worry as clients' bets go wrong in opening

Other stocks in news include Sun Pharma whose board approved announced a Rs 675-crore buyback offer, to purchase up to 7.5 million equity shares. The board fixed a price of Rs 900 a share, a premium of 19.7% over Thursday's closing Rs 751.70. The stock is trading with marginal losses.

State Bank of India  plans to raise $1.5 billion from foreign markets via bonds to fund its expansion and pay off securities maturing in the year. The stock lost over 3%.

India on Thursday launched a pilot project aimed at introducing compressed natural gas (CNG) as fuel for two-wheelers. The project, nick-named "Hawa Badlo", is being implemented by Delhi's city gas distributor Indraprastha Gas Ltd (IGL) and its parent firm, GAIL (India). GAIL is down 2%.

ONGC, IOC, HPCL, BPCL: Indian state oil firms may buy a stake in Russian oil major Rosneft, oil minister Dharmendra Pradhan said, signaling a move that would hoist the country's overseas energy portfolio to a new high as the company pumps more oil than ExxonMobil. ONGC, HPCL, BPCL,IOC have declined up to 3.5%.

Car major Maruti Suzuki India has lost 3% 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.

Tata Motors and Tata Steel have plummeted between 9%-12% 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.

Shares of ten IT companies have fallen between 2%-5% as early voting returns on the Brexit referendum suggested Britain was on the brink of leaving the European Union

TCS (down 2.41%), MphasiS (down 4.01%), HCL Technologies (down 4.61%), Tech Mahindra (down 3.85%), Oracle Financial Services Software (down 2.42%), Wipro (down 2.09%), Infosys (down 2.23%), Persistent Systems (down 4.6%), MindTree (down 3.01%) and Hexaware Technologies (down 2.34%) edged lower. The UK is the second biggest IT outsourcing market after the United States for the IT companies.

Stocks of four companies involved in oil exploration & production activities are down upto 4% as global crude oil prices dropped post referendum results suggesting a vote for Brexit.

Cairn India (down 4.05%), ONGC (down 3.9%), Oil India (down 2.22%) and Reliance Industries (RIL) (down 3.33%) dropped.

Lower crude oil prices will result in lower realization from crude oil sales for oil exploration & production (E&P) firm.

With Reuters & Capital Market input