Learn With ETMarkets: Sectoral winners and losers amid global supply chain shifts in India

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learn-with-etmarkets:-sectoral-winners-and-losers-amid-global-supply-chain-shifts-in-india
Learn With ETMarkets: Sectoral winners and losers amid global supply chain shifts in India

The global supply chain landscape is undergoing significant transformation, driven by geopolitical shifts, technological advancements, and strategic policy reforms. These changes are reshaping India‘s economic sectors, influencing stock performance across various industries.

Read on to learn more about the impact of global supply chain reconfiguration on sectoral stock performance in India, supported by data and analysis.

India’s Strategic Position in Global Supply Chains


India is rapidly emerging as a key player in global supply chains, positioning itself as a preferred manufacturing and sourcing hub for companies worldwide. This rise has been driven by several strategic advantages India offers. The Indian government has introduced pivotal policies such as ‘Make in India’ and the Production Linked Incentive (PLI) scheme to boost domestic manufacturing capabilities and attract foreign investment.

By incentivising local production, these policy initiatives aim to reduce India’s dependence on imports and enhance the resilience of supply chains against global disruptions. Furthermore, India is benefiting from major geopolitical shifts as companies look to diversify their supply chains beyond China due to factors like rising labour costs and trade tensions.

India’s vast workforce, competitive wages, strategic location and ongoing infrastructure development make it an attractive alternative as global supply chains are reconfigured. The realignment of multinational production capacity to India underscores its growing prominence as a global supply chain destination.

Sectoral Performance Analysis

The reconfiguration of global supply chains has had varied impacts on different sectors in India.

Top Performing Sectors

Defence and Railways: The defence and railways sectors have seen tremendous growth in 2023, boosted by strategic government efforts. With a focus on self-reliance and import substitution, defence stocks have surged as domestic procurement and production are encouraged. Key companies like Hindustan Aeronautics Limited (HAL) have seen share prices grow over 150% amidst these tailwinds. Similarly, railway infrastructure firms like RVNL have exceeded 200% return, propelled by massive investments and public-private partnerships aimed at upgrading India’s railway network.

FMCG and Automobiles: The fast-moving consumer goods (FMCG) sector showed resilient performance in 2023, recording a 26.5% return as per industry reports. Defensive buying by consumers and a gradual revival in rural demand provided an upside to FMCG stocks despite input cost pressures. The automobile sector also saw robust 16% growth compared to the previous year, as surging demand was driven by new product launches, improved semiconductor supplies and a lower base effect. Economic recovery and higher capacity utilisation further supported the sector’s growth.

Technology: With over 15% returns in 2023, technology stocks demonstrated investor optimism and remarkable resilience despite global tech sector challenges. Hopes of future rate cuts, strong deal wins by IT giants, increasing enterprise digital investments and technological innovations buoyed the performance of India’s technology sector. Key firms continued to drive market dominance through strategic bets on cutting-edge technologies like AI, cloud computing and cybersecurity.

Underperforming Sectors

Information Technology (IT): The IT sector faced challenges with a decline of over 20% in FY23, attributed to global tech downturns and reduced demand.

Metals and Realty: Both sectors struggled due to fluctuating commodity prices and real estate market uncertainties, recording declines of -14.42% and -16.44%, respectively.
Factors Influencing Sectoral Performance

Supply Chain Disruptions: Indian companies experience significant stock declines during supply chain disruptions, losing an average of -2.88% of shareholder wealth within an 11-day window surrounding such events.

Inflationary Pressures: Rising costs in production and transportation have exacerbated inflation within supply chains, affecting sectors reliant on imported raw materials.

Technological Advancements: Sectors that have embraced digital transformation, such as logistics and manufacturing, are better positioned to capitalise on supply chain efficiencies.

Economic Growth and Investment Trends


India’s economy continues to grow robustly, with an estimated GDP increase of 8.15% for 2023-2024. This growth is fueled by strong domestic consumption, government reforms, and infrastructure investments. The stock market reflects this economic momentum.

The Nifty 50 index recorded a year-to-date increase of approximately 12%, marking India as the world’s fifth-largest equity market.

Foreign investors injected over $15 billion into Indian stocks on a net basis in 2023, highlighting growing confidence in India’s economic prospects.

Challenges and Opportunities

Despite positive trends, India faces challenges in fully capitalising on global supply chain opportunities.
Infrastructure Gaps: Inadequate logistics infrastructure remains a bottleneck for seamless operations. The National Logistics Policy aims to address these issues by reducing logistics costs from 14% of GDP to single digits by 2030.

Skill Gaps: Addressing talent shortages in specialised areas like automation and data analytics is crucial for managing complex supply chains effectively.

Wrapping Up

The reconfiguration of global supply chains presents both opportunities and challenges for India’s economic sectors. While some sectors thrive amid these changes, others face hurdles due to external pressures and internal inefficiencies. Strategic government initiatives, technological advancements, and geopolitical shifts will continue to shape India’s role in the global supply chain landscape, influencing sectoral stock performance.

Investors should remain vigilant about these dynamics, leveraging insights into sectoral trends to make informed decisions. As India strengthens its position as a global supply chain hub, it offers promising prospects for long-term economic growth and stock market performance.

Analyst Disclaimer: The article is for information purposes only. This is not an investment advice.

(The author is Vice President of Research, TejiMandi)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

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