New Delhi: Two Tweets from US President Donald Trump have left financial markets trembling again!A surprise threat from Trump to impose fresh tariffs on China just when a large Chinese delegation was readying to head to the US for trade talks sent stocks and crude oil prices tumbling on Monday morning.But Indian market was an exception, as a drop in crude prices helped offset the negativity.At the time of writing of this report, the BSE Sensex traded with a 300-point cut after slumping 450 points earlier in the day, while Nifty50 was back above 11,600 level.This wain contrast to the selloff seen among other Asian markets.
Chinas Shanghai Composite slumped over 5.4 per cent, followed by a 3.84 per cent fall in Hong Kongs Hang Seng, 3.52 per cent drop in Singapores STI, 1.83 per cent slide in Taiwans TWSE and 0.9 per cent cut in Koreas Kospi.
India has managed to narrow its own trade deficit with China ever since the onset of the US-China trade war.
Analysts said if this and softer crude price trends continue, they might favour the Indian market going ahead.
The development (Trump threat) is negative for global markets, but we see it as a slight positive for India, as it caps the upside for crude oil in the near term.
Indias trade deficit with China has reduced by $10 billion since the trade war started, said Sameer Kalra, Founder at Target Investing.On Monday morning, Brent crude oil futures traded $1.51 per barrel, or 2.1 per cent, down from their last close at $69.34 per barrel.
Technical charts suggest Brent is all set to break the support at $68.74 a barrel and fall towards the next support at $67.01.India meets over 80 per cent of its oil demand through imports.
A fall in crude oil prices decreases dollar demand, which add strength to the rupee-dollar exchange rate.
A rise in the rupee pushes up dollar returns for foreign investors, making their India investment attractive.Recent trade data from the US Census Bureau suggests India has outperformed the moderate gains expected from a US-China trade war, UBS said in a note.The foreign brokerage argued that even if the trade issue settles down in the near term with a truce between the two countries, it may still act as an overhang.The US-China tussle has led to an increased spotlight on the shift of manufacturing away from China to avoid business losses, but the long-settled manufacturing hub established in China was already seeing supply chain shifts over the past few years, UBS said.Given the scale of China's manufacturing, India is potentially better placed to absorb any meaningful shift.
While the scale of skilled labour required is present, even in Vietnam, the sheer scale in India may ensure competitive wages even if there is a big shift.
The scale of power generation and, most importantly, the attractive big local market are clear advantages for India compared with its peers regionally, it said."Escalating trade war could have more negative impact on China and the Chinese economies, than on the US.
Clearly, if these tariffs go through, they almost certainly would do, because they would have no reason not to have an escalating trade war, Geoff Dennis, emerging markets commentator, told ETNow.
"India would be a relative beneficiary of this as there is limited trade links between China and India.
There will be a sharply weaker Chinese economy, compared with what we had anticipated prior to this latest extraordinary tweet, probably that too will help India.
The risk for EMs from all of this is that the dollar may rally and that could hurt all emerging markets.
So, India would be hurt by this, but it would be hurt a lot less," Dennis said.China can retaliate, said Seth R Freeman, GlassRatner Advisory.
"There are talks about cancelling the meetings entirely -- the leadership in China may project strength to its own people and to not create perceptions that the Trump administration can push China around," Freeman told ETNow.