Tata Motors Paces India Stocks Selloff on Brexit Vote Result

  • Sensex pares loss as automakers, financial companies rally
  • Rupee slides most since August on fears of foreign outflows

Jaguar Land Rover owner Tata Motors Ltd. slumped the most since 2012, sending India’s benchmark stock index to its biggest drop in almost four months as Britons confounded markets and bookies by voting to leave the European Union.

Tata Motors, whose JLR unit gets a quarter of its sales from Europe, plunged 7.9 percent, the worst performer on the S&P BSE Sensex. Tata Steel Ltd., which has plants in the U.K. and the Netherlands, tumbled 6.4 percent. State Bank of India, Axis Bank Ltd. and ICICI Bank Ltd. slid at least 3 percent. India VIX Index, which measures the cost of protection against market fluctuations, surged to a three-month high.

The Sensex lost 2.2 percent at the close. The gauge slumped at opening bell as realization that Brexit was looming triggered a selloff in Asian equities. Losses deepened to as much as 4 percent, luring investors to companies most-tied to the economy such as automakers and financial-services firms. Comments by the central bank that it would provide liquidity support also helped the rupee pare a decline and saw shares reduce the day’s losses.

“We replicated Asian markets and fell like nine pins in the morning before investors began to realize that the impact from the vote would be limited to a sub-section of the market,” Kaushik Dani, a fund manager at Karvy Stock Broking Ltd. in Mumbai, said by phone. “There was buying in sectors where the British pound has no role to play. The currency market also provided a good amount of support.”

‘Buy List’

Tata Consultancy Services Ltd., Infosys Ltd. and Wipro Ltd., the nation’s largest software exporters that get a quarter of their revenue from Europe, retreated. In comparison, motorcycle maker Bajaj Auto Ltd., Mahindra & Mahindra Ltd., which produces tractors, and Asian Paints Ltd. were the best performers on the Sensex.

Financial-services companies rallied. Muthoot Finance Ltd., Max Financial Services Ltd. and Bajaj Finserv Ltd. rallied to records, while Manappuram Finance Ltd. climbed to its highest since May 2011. State Bank of Bikaner & Jaipur and Punjab National Bank gained more than 2 percent each.

“Keep your buy list ready” as the nation’s improving economy would help minimize the impact from external events, said Vikas Khemani, chief executive officer at Mumbai-based Edelweiss Securities Ltd. He’s bullish on companies linked to the domestic economy such as lenders, engineering and consumer companies.

Fund Flows

Some investors are concerned the U.K.’s exit could curb demand for emerging-market assets, halting the 18 percent rally through Friday in the Sensex from a low in reached in February. The rebound had put India on course to become the first among a valued at more than $1 trillion to crawl back from a bear market this year.

“India is one market where investors have made money after the recent rally, and it is easy psychologically to sell,” Nikhil Johri, chief investment officer at Trivantage Capital Management India Pvt. in Mumbai, said by e-mail. “Brexit will compel a few foreign funds to lighten the positions in Indian markets as they look for dollar returns."

Overseas funds have bought $657 million of shares in June, set for the fourth month of purchases, data compiled by Bloomberg show.

U.K. Prime Minister David Cameron resigned, saying he’d serve another three months, after a 52 percent majority rejected his pro-EU campaign. The result sets the U.K. up for years of bitter divorce talks with the first round likely to come at an EU leaders’ summit next week. Britain must now count the economic and financial cost of an exit that Cameron warned would spark a recession.

“I don’t think people were ready for this outcome,” said A.S.T. Rajan, senior managing director at Aquarius Investment Advisors Pte. in Singapore. “It’s probably time to nibble at some Indian stocks and wait to see the unraveling of the rest of the financial markets to decide what to do.”

Before it's here, it's on the Bloomberg Terminal.