The Brexit issue, which did not progress much since the historic day of June 23, 2016, when the people of the UK voted through a referendum to leave the European Union, seems now to be heading towards closure.

Britain and the European Union said on Thursday that they had struck an outline Brexit deal, which would now need to be formally approved by the bloc and ratified by the European and UK parliaments.

In an immediate reaction, the Indian markets rejoiced, with the BSE Sensex zooming by over 500 points on Thursday. Definitely, a Brexit deal would eliminate some uncertainty for investors across the globe.

However, Brexit will not be significant for Indian investors in the short term, except for some knee-jerk reactions here and there due to volatility in global markets.

With one of the major uncertainties coming to an end, some global investors would definitely resort to risky trade, which in turn will boost equity markets globally. That could benefit Indian markets too.

However, that said, Indian markets would continue to chart its own path thereafter, as we have our own set of problems at the domestic level.

The first and the major issue is the slowdown in gross domestic product (GDP). Policymakers have to fix the issue. The GDP growth rate in the first quarter ended June 30 had dropped to a six-year low of 5 per cent.

Though tax cuts to India Inc (in September) and the continuous rate cuts announced by the RBI are welcome moves and signal that the government is proactive, the confidence of India Inc is very low.

Another key worrying factor is the slowdown in banks’ credit offtake. Bank credit grew at 8.8 per cent by end-September 2019, compared to 12.5 per cent a year ago, according to the latest RBI data.

According to government statistics, private consumption expenditure decelerated to an 18-quarter low of 3.1 per cent in the June quarter.

“We believe the sharp decline in credit flow to commercial sector does indicate heightened risk aversion in the system,” said SK Ghosh, Group Chief Economist, SBI, in a research note.

Unless we fix our domestic problems, Brexit deal or no deal will have limited impact on Indian investors. However, a few companies such as Tata Motors, Tata Steel, Tata Elxsi and Motherson Sumi, among others, from the auto and metal spaces, may have a rub-off effect of the same.

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