Indian steel, copper, aluminium, engineering goods and specialty chemicals companies could benefit from the escalating conflict along the Russia-Ukraine frontier, with the war disrupting supply lines and potentially expanding opportunities for local companies that generate the bulk of their merchandise exports revenue from Europe’s richer neighbourhoods.
“Supply disruption in EU regions could also result in near-term demand for Indian steel and engineering products,” said Sanjeev Hota, head of research, Sharekhan.
“Also, there could potentially be tactical near-term benefits for India as China, a close ally of Russia, could defy sanctions. That could result in global companies looking for alternative supplies for specialty and other chemicals from India.”
Markets across the globe reacted sharply to Moscow’s military manoeuvres. Major indices declined between 3% and 5%, while gold hit the highest since early 2021. Crude oil prices are now hovering at around a 7-year high, with Brent oil prices surging past $100 a barrel for the first time since 2014.
In an anticipated encore to the coordinated China-Plus-One derisking moves by global buyers, the conflict between Russia and Ukraine could help India and other ASEAN countries that make specialty chemicals. “Any sanctions on Russia will hit China’s access to oil but have a little direct impact on India.
Countries defying sanctions would face reprisals from the Western banking system — and this could prove very disruptive to China’s ability to participate in the global trading system unhindered,” said Prasenjit K Basu, chief economist of ICICI Securities. “This would offer a potentially positive opportunity for India as an alternative supplier of manufactured exports, although the primary initial benefits would flow to ASEAN, Taiwan, Korea, and Japan,” he added.
The Indian steel industry posted 25.6% growth in crude steel production in the first eight months of 2021. Major commodities, which could further rise, are aluminium, as Russia is the third-largest exporter globally. As per Dr VK Vijayakumar, chief investment strategist at Geojit Financial Services, sanctions on Russia may impact exports of nickel, aluminium, steel, and copper from Russia, benefiting Indian producers of these metals. But on the flip side, prolonged Russia-Ukraine geopolitical tensions could lead to further inflationary pressure, compelling policymakers globally to accelerate raising interest rates at the cost of economic growth. Most analysts feel impact on the Indian economy is likely to be more short-term in nature as its economy will continue to be driven by its long-term fundamental growth prospects.
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