A major glut in stock markets around the world, including India, was removed with the UK and EU reaching a Brexit deal. However, most of the positive implications of the historic trade deal seem to have already been considered by investors.
On Thursday, investors hailed a potential Brexit trade deal between Britain and the EU that raised hopes that separate allies would avert a turbulent New Year’s economic rupture. 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 concluded a tight Brexit trade deal with the EU on Thursday at the end, just a week before it exits one of the largest trading blocs in the world. The deal, agreed more than four years after Britain voted by a slight margin to leave the bloc, offers a way out of a chaotic ending to a divorce that rocked the 70-year plan to forge the European unity from the ruins of the Second World War.
In the final stage, the UK parliament will vote to approve a trade deal with the EU on December 30, Prime Minister Boris Johnson said Thursday after the deal was announced with Brussels.
“The anticipation of a new infusion of nearly $ 2.3 trillion into the economy from the US Federal Reserve and the likely possibilities of the Brexit deal over the weekend helped the market recover from lower levels. For the next few days, traders need to be extremely cautious as the market has entered the volatility zone, ”said Shrikant Chouhan, executive vice president, equity technical research, Kotak Securities Ltd.
Investors should keep an eye on the progress in covid-19 vaccination for more insights.
“Idiosyncratic geopolitical risks, such as the acceleration of tensions between the US and China or the risk of Brexit, could significantly reduce risk appetite and damage emerging market equities. The former, in particular, could be relevant to Asia, ”said Manishi Raychaudhuri, head of Asia Pacific equity research, BNP Paribas.
Global flows have shifted increasingly to emerging markets, including India, in recent months. Since the lows in March, the MSCI India has gained nearly 80% and the MSCI EM has jumped more than 60% in dollar terms.
(Reuters contributed to the story)