• March 7, 2022
Russia-Ukraine War Impact
Impact of Russia-Ukraine war on Technology Sector
The impact on the businesses due to ongoing war is expected to put a pause in the further hiring plans of IT service providers especially from Europe which could intensify the war for talent in India. Data collected from the quarterly earnings reports of top Indian IT service companies suggests that Europe is the second most important client geography for software service providers to India contributing 20-25 per cent of the overall business. There is going to be a huge amount of work, projects which will be shifted to India, that may temporarily increase the need for local talent in the country and hence we could see huge demand for tech talent in the coming few months.
With higher remittances and services exports(Information Technology) we are in a better position to withstand the current account deficit and rupee volatility. Undoubtedly, there will be a dent in growth but it will be bearable pain.
Also due to depreciation of Rupee in terms of foreign currency, the IT companies can gain significantly as the majority of these companies have their operations outside India for which they get paid in foreign currencies and if the value of the foreign currency increases in terms of Indian Rupee then these IT companies will gain through this fluctuations.
Companies affected: Capgemini Technologies service India Ltd., abacus computers, Hexaware technologies
Impact of war on Materials and Logistic Sector
Mining sector and Agrochemicals sector companies will have negative impact due to supply disruptions. Refinery sector companies will have negative impact due to increase in crude oil prices as India imports more than 80% of the crude oil, packaging sector companies will have negative impact due to non-availability of pulp and paper, Chemicals and Real Estate sector companies will have negative impact because of increase in prices of raw materials due to the supply disruptions caused by the war and Airport and Logistics sector companies will have negative impact due to delays due to sanctions on Russia.
Companies like Hutti Gold Mines Company Ltd., Epiroc Mining India Ltd., Syngenta India Ltd., Nandan Cleantec Ltd., Parry Agro Industries Ltd., T Stanes and Company Ltd., Indofil Industries Ltd. and PB Global Ltd., Amol Minechem Ltd., Cals Refineries Ltd., Manjushree Technopack India Ltd., Texel Industries Ltd., India Potash Ltd. Premier Cryogenics Ltd. Mil Industries Ltd. and Bolton Properties Ltd. will have a negative impact.
Oxygen sector, Elevator sector, Electronics sector companies will have no impact as these sectors are not dependent on Russia and Ukraine. Companies like Asiatic Oxygen and Products companies like Marino, OTIS Elevators and Auckland International Ltd. will have no impact.
Cement sector and Iron and Steel sector companies will have positive impact due to increase in its prices due to supply disruptions due to war. Companies like Srichakra Cement Ltd. APL Metals Ltd. and ESL Steel Ltd. will have a positive impact.
Impact of Russia- Ukraine war on consumer staples:
The consumer staples business is on a knife’s edge as a result of the Ukraine-Russia conflict. On the one hand, enterprises must fight inflation, which has resulted in high input prices, and on the other hand, they must absorb as much cost as possible, given that a downturn in demand does not support price increases. In India, the battle will have a big impact on family spending, with many consumer product businesses not ruling out future price rises as the pricier crude oil has a cascading effect on consumer products. Crude oil prices, which have risen beyond $100 per barrel, will have an influence on practically all consumer-facing items, either directly or indirectly. India imports approximately 80% of its oil, and the current price spike is putting the country at risk of inflation. According to the Reserve Bank of India, every $10 increase in oil prices causes inflation to climb by 0.5%. As oil prices rise, inflation in India may rise as well, making essential products such as vegetables, fruits, lentils, and oil more costly.
FMCG Stock like – Empire Spices and Food, AV Thomas will have a negative impact as the prices of products may increase.
Alcoholic Beverages stocks like – Bira , Mohan Meakin, Blossom industries, Ab inbev, John Oakey & Mohan will have a negative impact on global barley prices, which have already escalated because Russia accounts for the world’s second largest production of barley.
Impact of Russia-Ukraine war on Financial Sector
The Russia and Ukraine war has a negative impact on Financial sector. Stock market is constantly showing a downward trend. Financial transactions between India and Russia have come to a grinding halt after Indian banks are forced to stop sending funds to Russian exporters after the European Union and the US and other western partners cut off Russia from the SWIFT system even as Russian companies put pressure on the lenders. Most of the payments to Russian companies that are due are for defense-related items. companies impacted by this war are tamilnad mercantile bank, capital small finance bank , fincare small finance bank
Negative impact of the war on commodities like crude oil has affected commodity exchanges as well in a negative way, as people are currently trying to play safe and are avoiding buying of commodity stocks. Companies affected by the same are Indian commodity exchange and metropolitan stock exchange of India.
Impact of Russia-Ukraine war on Consumer Discretionary
The consumer discretionary sector that involves direct purchases from consumers is witnessing an adverse impact due to war between Ukraine and Russia.
Consumer Discretionary are very much sensitive to the macroeconomics environment conditions. FMCG companies always need to fight inflation that leads to higher input costs, that they need to absorb without raising prices due to lower consumption if the prices are raised. Inflation The inflation impact is not mitigating. On top of that, we are again seeing a 4-5 percent inflation.
The war has further deepened the input cost rise. With rise in crude oil prices products. Logistics would become more expensive and this will impact availability as well as lower margins for the consumer discretionary companies.
Companies that have very logistics dependency like Madbow, Reliance Retail and Bazaar India will face consequences due to war.
Russia and Ukraine account for nearly 20 percent of the global export of steel. In the aftermath of the war, the price of steel has gone up in India by Rs 14,000 per tonne. This has affected construction, auto-parts and bicycle industries adversely but gives more opportunity for steel manufacturers like ESL steel will be able to benefit from the spillover.