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Britain edges closer to Brexit: UK-linked Indian firms that stand to gain from Johnson’s win

Ajay Bodke, CEO & Chief Portfolio Manager at Prabhudas Lilladher said the victory essentially means a divorce is certain as the electorate has weighed in favour of exit strategy enunciated by Boris Johnson. With the untangling of mess, the market will heave a sigh of relief but it also creates another set of problems, he added.

, ETMarkets.com|
Updated: Dec 13, 2019, 05.38 PM IST
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Bhasin said the win also bodes well for other OEMs, which have business in the UK, for example Motherson Sumi and Bharat Forge.
NEW DELHI: Boris Johnson-led Conservative Party stormed the UK general election as electorate vindicated his stance on divorce with the European Union. The victory now clears the air over what the majority of the UK wants.

Now, UK-linked Indian companies can take a sigh of relief. Analysts see this as a positive for the stocks that have exposure to the country, especially select names from auto and IT packs.

“The win should give confidence and sentiment should improve as Johnson will finally get a decision on Brexit. It has been hanging as Sword of Damocles for the last three years. It will definitely benefit the likes of Tata Motors, which have got an unhedged position on the pound. They should see a lot of mark to market gains,” said Sanjiv Bhasin, EVP-Markets at IIFL.

Bhasin added that the win also bodes well for other OEMs, which have business in the UK, for example Motherson Sumi and Bharat Forge.

Shares of Tata Motors, which earns around 16 per cent revenue from the UK thanks to its subsidiary Jaguar Land Rover, gained around 3 per cent in the afternoon trade on Friday. This comes on top of 7 per cent gain a day prior. Bharat Forge was up 4 per cent and Motherson Sumi gained 3 per cent today.

Sanjeev Hota, Vice President - Head of Research at Sharekhan also said stocks of companies that have exposure to the UK should be positively affected.

“Stocks such as Tata Motors, Motherson Sumi in the auto pack and Mastek, TCS, Infosys and Tech Mahindra from IT pack are definitely going to show some positive movement going forward because there was uncertainty because of Brexit not going through, there would be some delay in awarding of projects and impact on the pound. So, if there is smooth Brexit, it will be positive for these stocks,” he said.

IT pack was trading in the green following the news. Nifty IT was up 0.93 percent led by gains in Tata Elxsi, TCS, Wipro, Infosys and HCL Tech. Nifty Auto was up 1.33 per cent. This was despite 14 paise gain in the rupee against the US dollar.

Ajay Bodke, CEO & Chief Portfolio Manager at Prabhudas Lilladher said the victory essentially means a divorce is certain as the electorate has weighed in favour of exits strategy enunciated by Boris Johnson. With the untangling of mess, the market will heave a sigh of relief but it also creates another set of problems, he added.

“The hard work starts now. Let us not forget that in case of JLR, the production units are in the UK but most of the vendors are in the continental Europe. So, they have to ensure that shipping of goods are without any disruptions.”

He added that the corporates would have preferred a single market. “Unless the UK manages comprehensive trade deals with major economies, the possibility of disruption in global trade is there and the multinational companies, especially financial sector giants, could vote any disruption by their feet as the UK is a very small market compared to the EU,” Bodke said.

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