Shares of Indian companies having operations and exports to the European Union have plunged on selling pressure after Britain which voted in a historic referendum to exit the European Union would hurt revenues and profitability.
"With the possibility of Brexit becoming a realty earninns of these companies are at risk while a wait-and-watch policy would be prudent at this point in time amid uncertainty of future earnings projections. Further, cost escalations would reduce the competitiveness of corportes operating out of Britain unless there are trade negotiations with other European nations. However, it may be noted that there is a long time lag between Brexit taking shape and the perception that the market is factoring now," according to a fund manager of a prominent domestic brokerage house.
Stocks in export-led sectors such as pharma and information technology along with auto component manufacturers were among the most impacted.
Tata Motors which earns 25% of its total revenue from its UK-based subsidiary Jaguar Land Rover in Europe was the top loser on the bourses plunging nearly 8%.
Tata Steel which has large operations in the UK and earns 58% of its total revenues from Europe dropped over 5%.
IT majors Infosys, TCS, Wipro and HCL Technologies which earn 23%-27% of their revenues from exports to Europe were down 2%-4% each. Tech Mahindra's income from exports to the UK comprises nearly 30% of its total revenue. The stock was down over 3%.
In the pharma pack, IPCA which has substantial exports to the European region was down over 2% while Dr Reddy's Labs which earns 26% of its total revenue from Europe was down over 1%. Among others Glenmark Pharmaceuticals was down over 2%.
Auto component manufacturers which have substantial exports to Europe also witnessed selling pressure. Motherson Sumi which earns nearly 70% of its revenues from exports to the Europe slumped nearly 9%.
Bharat Forge which had streamed lined operations of its subsidiary in Germany in October last year was down over 4%.
Suzlon which has key R&D centres in Denmark, Germany and Netherlands and earns 60% of its total revenue from Europe dropped nearly 5%.