Chinese dragon spews fire: Will it singe India?

Raveena Singh
moneycontrol.com

Equity markets globally took a knock this week after the Chinese central bank devalued the yuan sharply, a move that led to such a sharp fall in the Chinese stock market that trade had to be suspended twice.

The impact, which was felt in India as well, has worried observers who say the developments in China are not good either for equities or for the economy.

Through the week, CNBC-TV18 spoke to a number of experts, with respect to the ongoing turmoil. Here are some highlights:

Manishi Raychaudhuri of BNP Paribas says China’s decision to depreciate its currency at such a pace took the markets by surprise.

"I don't think anybody had anticipated that the central bank — PBoC — would actually indulge in a daily fix, which was successively lowered than the previous day's closing which essentially indicated that they were indirectly guiding the currency down, leading to a concern about a currency war across the region."

Commerce Minister Nirmala Sitharaman is worried that the yuan impact will likely be felt across India as well, which has faced an onslaught of Chinese dumping.

"…It is a worrying development for me, looking at the imports which are coming from China, it going to make them even more cheaper. Our products in comparison will be more expensive. China wants to push goods into different countries, particularly India."

Some sectors, such as tyres, will be particularly hit, says AK Bajoria, President and Director, JK Tyre.

"The 4 percent Chinese yuan devaluation definitely makes the situation worse because already, the imports into India amount to almost about 35-40 percent in terms of truck bus radial tyres and it is almost 45 percent in the case of passenger car radials."

But the worst is not yet over, says Andrew Holland, CEO of Ambit Investment Advisors. 

"We are going into the new week, we are still on those nervous, uncomfortable, what is happening in China kind of thinking and that is going to keep the market very volatile for sure," he says.