With Europe on the brink of imposing lockdowns again due to the mounting second wave of the coronavirus crisis, there are fears arising whether this wave will bring about a disruption in business across the world and India.
Mr Ajay Srivastava, CEO, Dimensions Corporate Finance Services talks about the possible impact that it may have on India.
“On the export front, India is on a large export mission, export is not our saviour. What comes next are the stimulus packages and when the stimulus comes, businesses will be back to normal. It’s nearly important to have grave times to allow liquidity flowing back in the system,” he believes.
From an economic point of view, Europe forms approximately 19.3% of India’s total exports and 15% of total imports. If we observe sectorally, for example, India exports about 27% of its automotive components production with Germany and UK accounting for 7% and 4% respectively.
Mr Srivastava lays out the supply chain mechanism which has been efficient as there are other suppliers in the world apart from Europe. Germany’s import amounts for nothing critical in the pipeline of products or requirements at this point.
One sector whose growth shot up righty after unlock measures came in is the automotive space.
“Auto bounce back was a notable one although it won’t be long term. Auto might survive another quarter but they will fall off. Counts are big and the cost pressures are good. I will be careful in buying more in auto space,” he describes.
Mr Srivastava feels that retail brokerage services will remain the most attractive sector. “While the easier way would be going stock up on ICICI bank, I would recommend an ICICI Securities. It has doubled over the last years,” says Srivastava. He believes that insurance space will bore profits from the volatility that comes in from all the external negative factors.
While talking about the impact of Europe’s economic disruptions on the technology sector Mr Srivastava expresses that he is not worried. In his opinion, US plays a broader role and Europe is just a slideshow at the end of the day with no significant blockbuster projects.
“Europe doesn’t constitute even 20-25% of the total sales of top IT companies. Net-net sector is doing fine because of the absence of leverage with the work from home working brilliantly for the technology space,” he says.
Europe’s second wave has potential to make India lose a market imminently, but India should remember is that it’s only temporary. In three months, India caught up with the demand and supply with a much stronger market.
While underlining that only disruption of Europe’s second wave will be postponed, exports and US disruptions are actually the ones to watch out for; he sums up that Indian markets will exhibit much fury in the coming days.
Source: ET Now