China- West tensions and their positive impact on Indian stock markets

Have a glance at how the China-West tensions can be beneficial for the Indian stock markets.
China-west tensions and the Indian economy
China-west tensions and the Indian economy

Indian companies release their September quarter earnings at the time when the country celebrates its most awaited festival, Diwali.


This festive season is the creamy season for domestic consumption. 

During this time, analysts seek a reality check on India's billion-plus shoppers. Moreover, they also seek to analyze the performance of Dixon.


Not only Dixon but analysts have also been excited to glance at the performance of Amber Enterprises India Ltd.


Dixon Technologies (India) Ltd. creates LED TVs for Samsung Electronics Co.


Amber Enterprises India Ltd. supplies air-conditioner parts to LG Electronics Inc.


The reason for these two homegrown firms is that it is expected that soon, such unknown entities may turn into large giants.

Why is such a good outcome expected? Well, looking at the current geopolitics may give us all the answers. 

Well, if one notices the rout in Chinese stocks that lived for a brief time after the Chinese President's ascendancy, one may call it a wake-up call.

Beijing, on one hand, threatens to drift away from the West's political and economic orbit under the country's President Xi Jinping. This is leaving multinational firms, on the other hand, in need of a backup location for manufacturing gadgets.

And oh, for the China+1 strategy, the situation makes India the deepest labor pool.

The stock market is analyzing the current order flow. Talking about Dixon, its market value is currently more than $3 billion, thanks to the sixfold leap in two-and-a-half years.

It is important to note that Acer, Taiwan's popular PC maker, declared a partnership with the Indian firm the previous year. Dixon is currently creating monitors for Dell Inc. Soon, the company is expected to start manufacturing Android-based smart TVs, under the umbrella of the sub-license from Alphabet Inc. An increase of 23% in profit and 38% in sales was also seen from a year before the September quarter.

All these trends are making analysts super confident. 

For instance, Jefferies Financial Group Inc. expects an expansion of over 63% annually over three years. The researchers say that “We view Dixon as a structural play on indigenization." 

If we talk about the premium for Indian stocks over emerging market shares, 7t is presently three standard deviations greater than the 10-year average. However, one can also sense nervousness here.

The asset quality and margins have improved for the domestic banks. However, alternative investment themes are presently appearing tired.

The fact that the worst of the inflation surge is over sounds like a breath of relief. The Reserve Bank of India may be about to pay its interest-rate cycle. 


However, one cannot undermine the elevated price pressures.


If we talk about the festival season, quarterly consumption volumes have seen a decline of 1 percent annually for the last three years. 

Unilever Plc's local unit has stood at its lowest gross margin for the past several years.


The software services industry is facing the brunt of the weak demand from European clients, despite its high employee attrition in the country.


Dixon, albeit, is eligible and capable of Indian government subsidies, coming under the umbrella of five different production-linked incentive programs.

India is undoubtedly a resource-constrained economy, which is still bearing the brunt of the pandemic. In such a situation, Indian Prime Minister Narendra Modi's five-year $24 billion industrial policy can be seen as nothing but an expensive gamble on manufacturing. 

It is said that this huge amount of money could be more efficiently utilized in health, education, and urban infrastructure. 

The ball is now in the court of the CEOs of Fortune 500 companies. In case Ch8na+1 is a real theme in the country this festive season, it is more about China and its not-so-good relations with the West.

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