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What is China's Evergrande crisis? How can it impact the Indian share market?

Let us first understand the Evergrande Crisis quickly:-

Evergrande - a major player in China's real estate sector may default on it's interest payments.

WHY?

  • Heavy debt ($300+ billion worth of liabilities lying with banks)
  • China government is not showing any support
  • Banks are not giving further loans.

Impact on the World and India —

There are 2 aspects of looking at it.

A. If Evergrande goes down,

1. Further slowdown in China's real estate market (which has already suffered due to corona pandemic) and hence the Chinese economy. This can encourage inflows to shares in India (as an alternative to China)

2. Indian commodity exports companies (steel companies including SAIL, Tata Steel, JSW steel, metal companies), mining, chemical stocks can be under pressure. Why? - Depreciation of China currency may hit on exports from Indian companies

B. The other scenario could be that the China government intervenes and backs Evergrande, (which is more likely), then there would not be a major impact all over the world.

Key learnings :-

For new investors - try to stay away from investing in commodity stocks (metals,steel especially) and any company which depends heavily on exports, specifically to one country,

For traders - watch out for stocks from real estate and housing sector for a dwing trade opportunity

Please like and comment if the post was useful and added any value.

Happy Investing!🙂✌️

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