Here’s How China’s Stock Market Crash Will Affect India

China’s market crash is being thought to be worse than the Greek crisis. But will it affect India all that badly?

While headlines around the world have been dominated by Greece’s possible exit from the Euro-Zone, India’s markets had stayed steady despite the ‘no’ vote.

However, it now seems that the bigger concern is the volatility in China’s markets. Over the last three weeks, China’s stock markets have shed approximately $3 trillion.

China has been one of the main engines driving global growth, and the meltdown is worrying.

The big question for us: how will this affect India?

What the Experts Say

The fall in Chinese markets was felt in India as the Sensex slumped 484 points or 1.7 per cent on Wednesday led by metal stocks, which plunged nearly 4 per cent on the Bombay Stock Exchange.

Leading authorities on financial markets say that while there has been a knee jerk reaction to the crash in all Asian markets, India may not suffer in the long run.

China’s was an isolated stock market. It had no impact on world markets, when China stock indices doubled and tripled in a very short span of time. So a crash in China’s markets too should show no major impact on other emerging markets.
— Shankar Sharma, Vice Chairman, First Global to Economic Times

India’s market crash was more of a knee jerk reaction to fall in Asian markets. A crash in Chinese markets could have no negative direct impact on India’s stock market. The undertone of the domestic markets is still positive as commodity prices have cooled down. Moreover, institutional investors are not putting all emerging markets in one basket when they sell or buy, but are increasingly holding discriminatory views based on the circumstances of each country.
— Ramesh Damani, Broker, BSE

In Fact, There’s Some Good News

Some sectors like the automobile industry are likely to suffer since China was one of the fastest growing markets for the industry. However, there may well be good news for India in other areas, according to Business Standard.

1. Cheaper Infrastructure
Copper and Aluminium trading is at an all time low as China was the world’s largest consumer. For us, this means that the cost of infrastructure projects like smart cities will come down significantly.

2. Mobile Phones Cheaper
If China decides to devalue the Yuan to push growth, the world market, including India, could be flooded with cheap Chinese goods. While this is good for consumers, it could affect manufacturing and exports negatively.

3. Inflation, Fuel May go Down
Oil prices were already low because of a global slowdown and the possible Iran-US nuclear deal. The China effect may help them sink even further. Low oil prices can help the Indian government control its deficit and check inflation.