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FDI - WINDOW OF OPPORTUNITY<br />
The stock markets around the world were jolted by the<br />
sudden exit of UK from European Union (EU), the event<br />
popularly coined as ‘Brexit’. While the global markets<br />
expected Britons to vote to ‘remain’ in the EU, the<br />
outcome came in as a surprise. This is after the British<br />
Prime Minister urged his countrymen to remain in EU.<br />
However, post the adverse outcome, he wished to step<br />
down as the Prime Minister of the nation, respecting the<br />
decision and silencing the murmurs for a second<br />
referendum. According to experts, the outcome comes at<br />
an inopportune time when the prime minister had been<br />
re-elected with a strong mandate and the ruling party<br />
won with absolute majority, thus providing stability to the<br />
government. Now, the successor to the present prime<br />
minister has to see through the whole unfortunate EU<br />
leaving episode. The pound had to take the beating while<br />
the dollar strengthened relatively as well as on buying<br />
demand as investors flocked to safe haven. The<br />
strengthening dollar as well as the Brexit issue is a major<br />
hindrance for the Fed to raise rates and might actually<br />
pause to let the whole episode percolate down without<br />
ruffling too many feathers. However, experts around the<br />
world are on a wait and watch mode with regards to the<br />
unforeseen events and risks it poses after the actual<br />
aftermath of the event. Majority of them have opined that<br />
the recession and the extent in EU will not spread like a<br />
wild fire just as the case in 2008 since it is not<br />
emanating from the same root causes. Nevertheless, it is a<br />
big impediment to the global stability and if the views of<br />
prominent experts are to be trusted, this is actually an<br />
opportunity for the Asian economies and foreign investors<br />
might be seen flocking in the short term. The Britons<br />
exited the EU as the campaign led by former London<br />
mayor, Boris Johnson, and UK’s right-wing populist<br />
political party, the UK Independence Party (UKIP)<br />
highlighted the opportunity costs for staying in EU. One<br />
of the reasons was migration within EU and rising<br />
inequality. While in reality the inequality has actually<br />
come down in the recent years as highlighted by an<br />
article in Live mint (titled It isn’t inequality that led to<br />
Brexit). Morgan Stanley has in fact raised its probability of<br />
a global recession in the next 12 months to 40 percent, up<br />
from 30 percent before. The notion or rationale has been<br />
the negative impact of political uncertainty on risk assets.<br />
According to Morgan Stanley, the event will likely spread<br />
to the impending US elections to be held in early<br />
November and further to general elections to be held in<br />
the Netherlands next year, presidential election in France<br />
(late April and early May) and national elections in<br />
Germany (late September).<br />
In the domestic markets, vastly people are keenly<br />
following the latest update on monsoon with utmost<br />
interest. Monsoon, the mega event of the year has left half<br />
of the country unsatiated so far although the latest<br />
updates suggest heightened advancement. The sentiment<br />
was captured by low bond yields on an expectation of<br />
reduction in interest rates led by bumper crop production<br />
this year. After the initial above average forecasts by the<br />
forecasting agencies – IMD and Skymet, the monsoon has<br />
so far clocked deficit of 13% as of 28th June. The deficit<br />
has narrowed from 17% (as of 23rd June, <strong>2016</strong>) and 23%<br />
deficit on 16th June. The percentage points are calculated<br />
by comparing the expected centimeters of rainfall with the<br />
Long Period Average (LPA) of past 50 years. While the LPA<br />
is 89 cms, IMD expects a total of 94 cm of rainfall this<br />
monsoon. The monsoon however arrived in Kerala a week<br />
later than its normal onset date of 1st June, but is<br />
believed to have rapidly advanced over peninsular Indian<br />
states. As of 28th June, 49% of the country had received<br />
normal rainfall, 17% had received excess rainfall and 34%<br />
had got deficient or scanty rain. In the southern peninsula<br />
rainfall has been 16% above average and in north-west<br />
India it has been 2% more than normal. However, central<br />
India, east and north-east India have seen a deficit of 23%<br />
and 26%, respectively. Clearly, when the first estimates<br />
are for 106% of the long-period average (LPA), the<br />
monsoon is expected to have spread across whole of India<br />
by end of June. Besides, this year the dreaded El Nino is<br />
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