The outbreak of ‘Coronavirus’ in China has got the investors worried across the globe. The economic impact of Covid-19 or Novel Coronavirus to the world equity markets will be bigger than that of SARS in 2003, which did not impact the world economy.
China is the focal point, and the role of the Chinese economy in providing incremental growth to the world economy cannot be ruled out. Hence, any slowdown in China is likely to impact companies across the globe both negatively and positively.
“During the period, the pie (share) of the Chinese economy (in the world economic growth) has grown 4 times to 16.3% from 4.2% of the world economy. If the situation takes longer to stabilize, the impact on the world economy will be higher,” Vinod Nair, Head of Research, Geojit Financial Services said in a report.
“The trade between India & China has also grown in the same period to USD 87 billion in FY19, imports being the major component. It will have some positives and negatives for India in the short to medium-term,” he said.
India imports large amounts of raw materials & semi-finished goods for sectors like auto, pharma (APIs), consumer durables and electronics. Costs are likely to increase which will also impact profitability.
Revenue and exports to China are limited to sectors like Agriculture, Auto, Aquaculture and Engineering.
Stocks that are likely to get impacted positively include companies that are in the electronic equipment, organic chemicals, fertilizers and plastics space that are top import areas from China, and are going to get the benefit from the fall in imports from China.
Eight stocks that are likely to benefit from the outbreak of Coronavirus are Dixon Technologies, PI Industries, Supreme Industries, Aarti Industries, UPL, KPR Mills, Asian Paints and Tata Steel, experts say.
Stocks that are likely to get impacted negatively from the Coronavirus outbreak are Tata Motors, Motherson Sumi, Havells India, Sun Pharma, and PI Industries, according to Geojit Financial Services report.