India-focused stocks save the day for Sensex

Indian markets pressed the exit button for the looming Brexit cloud with FIIs, domestic investors and high networth clients lapping up the mid-cap and small cap stocks.

While both the Sensex and the Nifty closed flat, rising 5.25 points and 6.10 points to 26402.96 and 8094.70, respectively, the real story was hidden among the mid caps and small caps, which have little exposure to either the UK or the EU region. The Midcap Index rose while Small cap

The headline indices didn't move much because of the continued concern over the fate of the IT stocks like TCS or Infosys, which have significant exposure to the UK, EU – about a third of their revenues come from there - and particularly to the BFSI sector of these geographies.

TCS was down by 2.93% and Infosys's market cap was shaved off 2.37% and more pain is in store for these bellwether IT stocks as fate of their businesses in the UK and EU would continue to remain uncertain, particularly those coming from the BFSI companies.

Shares of leading banking stocks like Barclays and RBS collapsed 19% and 24% respectively after trading in them had to be briefly suspended due to steep fall on Monday in the European markets.

Tata Motors and Tata Steel, which were battered on Friday, remained flat on Monday with minor losses at 0.09% and 0.69%.

Domestic economy depended sectors like cement, consumption, NBFCs that attracted fund flows.

The pharma sector saw brisk buying, notables being Biocon (6.61%) while most of the others appreciated by over 2%.

CRISIL expects pharma to remain largely unaffected by the EU turmoil while there could be double whammy for IT in terms of fall in discretionary spending and rise in administrative costs.

Reason attributed to interests in India markets ranged from Japan's currency intervention to a report by Moody's on Indian economy.

"Domestic sentiment was given a bit of a boost after global credit rating agency Moody's Investors Service reportedly said in a note that the Indian government's recent decision to relax FDI investment rules is credit positive for its Baa3 sovereign rating on India as it demonstrates continuation of reform momentum," Shreyash Devalkar, fund manager, BNP Paribas Mutual Fund said.

But it's not all hunky-dory for Indian markets.

Ambit Capital has some words of caution for domestic investors as it predicts Sensex slipping to 22,000 in the wake of adverse global developments.

"Brexit will affect India's exports, FDI and FII inflows, currency as well as domestic liquidity," Ambit Capital said in a report on the impact of Brexit on India.

Credit Suisse has advised investors to stick to domestic focused sectors like consumer, utilities, oil marketing companies and NBFCs till clarity about global economy emerges.