Sunday, June 26, 2016

Who is Afraid of Brexit, Really?

Last Friday, the 24th June 2016, which the media christened “The Black Friday”, when the global financial markets roiled, and lost over $2 trillion in value, Foreign Institutional Investors (FIIs) sold shares valued Rs.629 crore ($92 million), and retail investors purchased stocks worth Rs.118 crore ($17.50 million), which raises the important question, who really is and should be Afraid of Brexit?

It is not suggested here that global fears regarding Brexit are a Hoax, but merely that the jitters are exaggerated, and purely temporary.  We must realize that all the 28 member nations of the European Union were independent, sovereign states in the first place, before they voluntarily came together to form the common market.  So the sky is not really falling nor is it going to in future.

What remains to be understood is who is scared, who is not; who should be and who need not.

FIIs who pumped dollar funds into the Indian stock markets over the years, and jacked up the valuations to unreasonable levels, panicked and sold.  They also sold fearing irrational redemption by their investors back home. 

Value investors and even lay investors who invest in mutual funds and Systematic Investment Plans (SIPs) need not be and should not be Afraid of Brexit, and simply sit tight through the present turmoil, Nay aggressively purchase and accumulate shares of those excellent companies, which were pricy and unaffordable earlier.  In fact, right now, it is the Golden Opportunity to Master one’s temperament, and to Exorcise the Emotional Ghost called “Fear”.