The recent blockage of the Suez Canal might affect India’s earnings and stock market, but it’s not a cause for panic yet, say experts. CNBC reported on December 19 that about $35 billion worth of cargo and 57 ships changed their routes due to attacks by Houthi rebels. This situation could lead to higher shipping costs and delays.
Effect on India
Increased shipping costs could hit Indian businesses hard. Varun Gogia from ICRA Ltd says this might lead to higher prices for consumers and impact the economy, especially if the conflict in the Red Sea area continues. However, it’s still too soon to say if this will slow down India’s economic growth. Stock markets haven’t reacted much so far, except for some shipping stocks going up.
What Experts Say
Most market experts are waiting to see how things develop. They suggest it’s better to watch the situation rather than react hastily. Some investors are taking profits, especially in mid-cap and small-cap stocks, to safeguard against any potential market drops. The main concern is if the crisis drags on, it could hurt industries that rely on international trade.
Potential Sector Impact
Sectors like textiles, oil and gas, chemicals, capital goods, metals, and pharma could face difficulties. Increased costs and delays could hit these industries particularly hard. Sneha Poddar from Motilal Oswal Financial Services and Winnie Shekhar from Indus Law note that any long-term issues could lead to higher prices and challenges in fulfilling orders.
Comparison with 2021 Crisis
This isn’t the first time India has faced a trade issue due to the Suez Canal. In 2021, a container ship blockage caused major delays and increased shipping costs. That event, along with other global issues like COVID-19 and the Russia-Ukraine war, affected India’s GDP. But experts like Vinod Nair from Geojit Financial Services warn against directly comparing these events.
In summary, while there are concerns about the ongoing Suez Canal crisis, its full impact on India’s economy is still uncertain. The situation needs to be monitored closely, especially if the crisis continues for an extended period.