A large glut has been wiped out in equity markets around the world, including India, with the UK and the European Union reaching a Brexit deal. However, most of the positive implications of the historic trade deal appear to have already been heeded by investors.
On Thursday, investors applauded a potential Brexit trade deal between Britain and the EU that raised hopes that the separated allies would avoid a turbulent economic breakdown on New Year’s Day. On Thursday, the BSE Sensex closed at 46,973.54, up 529.36 points or 1.14% and the Nifty closed at 13,749.25, up 148.15 points or 1.09%. Despite a strong sell-off on Monday, the markets made the longest stretch of weekly gains since at least 2018.
Britain closed a tight Brexit trade deal with the EU on Thursday night, just a week before exiting one of the world’s largest trading blocs. The deal, agreed more than four years after Britain voted by a slim margin to leave the bloc, offers a way out to a chaotic end to a divorce that has shaken the 70-year project to forge European unity from the ruins of the Second World War. .
In the last tranche, Britain’s parliament will vote to approve a trade deal with the EU on December 30, Prime Minister Boris Johnson said on Thursday following the announcement of the deal with Brussels.
“Anticipation of a new infusion of nearly $ 2.3 trillion into the economy by the US Federal Reserve and the likely chances of the Brexit deal over the weekend have helped the market recover from lower levels. low. Over the next few days, traders need to be very cautious as the market has entered the volatility zone, “said Shrikant Chouhan, executive vice president of equity technical research at Kotak Securities Ltd.
Investors are expected to keep an eye on progress in vaccination against covid-19 for more clues.
“Idiosyncratic geopolitical risks, such as accelerating US-China tensions or Brexit risk, could significantly lower risk appetite and hurt emerging market stocks. The former, in particular, could be relevant to Asia, “said Manishi Raychaudhuri, director of Asia Pacific equity research at BNP Paribas.
Global flows have increasingly shifted to emerging markets, including India, in recent months. Since the March lows, MSCI India has gained nearly 80% and MSCI EM jumped more than 60% in dollar terms.
(Reuters contributed to the story)
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