Shares of companies with significant exposure to Europe came under pressure on February 22 as the Ukraine crisis escalated following Russia's recognition of separatist regions in the neighbouring nation.
Russian President Vladimir Putin on February 21 signed a decree that immediately recognised separatist regions in Easter Ukraine as independent, which are dominated by Russian-speaking people.
Tension in Eastern Ukraine has been increasing over the past few weeks as Russia said that it sees Ukraine’s possible entry into the North Atlantic Treaty Organisation as a threat to its security and has the right to retaliate.
Also Read: De-escalation of Russia-Ukraine tensions immediate priority: India at UN
With the region’s peace hanging in balance, Indian companies with exposure to the European Union have come under pressure as investors fear impact on business from the escalating tension.
Shares of Tata Motors, Tata Steel, JSW Steel, Motherson Sumi Systems, Varroc Engineering, Endurance Technologies, Dr Reddy’s Laboratories, and Bharat Forge declined 2-4 percent during the current session.
Auto ancillaries such as Varroc Engineering, Motherson Sumi, and Endurance Technologies have 30-60 percent of their topline exposed to the European market. Bharat Forge is also a major supplier of components to truck manufacturers across Europe.
The tension around Russia-Ukraine have become an additional headache for Indian auto ancillary companies who have been hit by the decline in demand from the original equipment manufacturers in Europe due to semiconductor shortage.
Tata Motors’ subsidiary Jaguar Land Rover has a major market in Europe, which is its biggest after the US and China. Similarly, Tata Steel’s European business could also come under threat because of the ongoing tensions in Ukraine and its reverberations on the rest of Europe.
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