China is witnessing unprecedented protests against the Covid curbs. The country has been following a strict zero-Covid policy since 2020 which has hit economic growth and disrupted the lives of millions of people.
The protests gained momentum recently and spread across the country.
Chinese stocks traded with gains on Tuesday amid speculations that some change to China’s zero-Covid policy could be announced due to intensifying unrest over the Covid curbs.
Media reports also suggested that China would speed up Covid-19 vaccinations for elderly people to ease the unpopular zero-Covid curbs.
What China Covid protests mean for the Indian market
Most analysts believe the protests in China have no direct impact on the Indian market. They can, however, affect indirectly through the fluctuation in crude oil prices and the flow of foreign funds.
In fact, the Indian market has been hitting fresh highs due to sustained capital inflow by foreign portfolio investors and a fall in crude oil prices.
If China's protests continue for a longer time, they will hit the crude oil prices significantly since China is the biggest importer of crude oil, however, if curbs in China end, the demand outlook for oil will improve significantly which will lift crude oil prices which will be bad news for India.
"If protests succeed and the Chinese government removes lockdowns, immediately global crude oil prices will see a knee-jerk reaction in terms of significant spurt. The same would be temporarily negative for the Indian equities," said G Chokkalingam, Founder & Head of Research, Equinomics Research & Advisory.
"Global oil price is a single source of or solution for multiple problems of inflation, trade deficits, forex reserves and therefore rupee exchange rate, which in turn would impact FII flows," said Chokkalingam.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the Chinese Covid situation and the protests there are unlikely to impact Indian stock markets.
"If at all, the impact will be positive since it will only accelerate the 'China Plus One' trend. Global markets will be swayed by the Fed’s comments and stance," said Vijayakumar.
Deepak Jasani, Head of Retail Research, HDFC Securities, also believes that Indian markets may not be much impacted by the developments in China (including Covid and protests).
"Asian economies and western countries who are more dependent on China as a sourcing base and destination for exports will be more impacted. However, in case the situation deteriorates dramatically, it could lead to risk-off sentiments globally and Indian markets could then get impacted as the flows into India can get reduced or reversed,” said Jasani.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.
