The recent Indo-China border conflict in the Galwan Valley of Ladakh has escalated geopolitical tensions between India and China. Amidst growing calls for ‘Boycott China’, stocks are going to take a hit with speculations of contracting bilateral trade.
In terms of sourcing, sectors like auto, consumer durables, pharma, telecom, chemicals and renewable power seem to be most dependent on China, said a report.
Alternative suppliers at the same scale or costs are lacking or difficult to substitute in many cases.
While the consumer durables sector is dependent on China for components, pharma is primarily dependent on Active Pharmaceutical Ingredients(API) sourcing.
Telecom stocks ( Vodafone and Bharti Airtel)
Telecom is dependent on China for network equipment as well as for 4G smartphone handsets as China caters to a whooping 75% of the Indian handset demand market.
Vodafone and Bharti Airtel would be the most affected in case of tariff or import curbs on telecom network equipment suppliers.
Any potential heightening of tension between the two nations could escalate supply-chain risks in the current economic situation, even as global economies look to recover from the pandemic.
Overall, it would be difficult as well as expensive for Indian firms to immediately find alternative suppliers, reports say.
Consumer Durables stocks (Voltas)
Voltas would be the worst affected in case of tariff hikes.
Sun Pharma and Cipla could be the least impacted as they are fully integrated and have considerable exposure.
Chemical stocks( Rallis India, Dhanuka, Sumitomo India, Insecticide India)
In the Chemical space, a greater impact could be marked on stocks like Rallis India, Dhanuka, Sumitomo India, and Insecticide India. A lower impact could be seen on PI Industries, UPL, Coromandel, and Bayer.
E-Commerce stocks (Info Edge, Zomato, Policy Bazaar, Paytm, Snapdeal, Ola, Swiggy, NigBasket, Byju)
In the e-Commerce space, Info Edge would be impacted as its investee companies – Zomato and Policy Bazaar – have exposure to Chinese investments. Indian tech and e-commerce startups like Paytm, Snapdeal, Ola, Swiggy, BigBasket, and Byju have significant investments from Chinese companies as well.
Utilities stocks( Tata Power)
In the utilities space, Tata Power has exposure to the execution and commissioning of solar power plants and hence will take a hit.