Impact Of War Uneven For Different Sectors

Chennai: The impact of the West Asia conflict on different sectors is uneven. While airlines, fertilisers and oil refiners face the highest pressure, sectors like pharmaceuticals are largely resilient.

The US-Israel-Iran conflict is driving up energy prices and freight costs. These first-order shocks have given way to second-order effects –higher inflation, supply constraints and balance sheet stress and these are now shaping India’s sectoral outlook, finds ICRA.

Airlines, chemicals, fertilisers, and refining & marketing face the highest pressure from elevated fuel costs and rerouting.

Aviation companies face acute margin pressure from high ATF costs amid weakening demand. Oil refining and marketing entities are weighed down by high under-recoveries from elevated crude prices. Fertilisers sector face margin compression from surging input costs, while chemicals and petrochemicals contend with raw material availability challenges constraining select players.

Several sectors including auto components, commercial vehicles, man-made fibre textiles, tyres, quick service restaurants (QSR), and retail apparel may see a moderate impact owing to cost pressure and demand sensitivity.

Auto OEMs face demand sensitivity and pricing constraints, while commercial vehicles are exposed to fuel inflation-driven slowdown risks. Auto components players may see demand moderation if the conflict prolongs, while tyre entities face export and cost headwinds.

Profitability of QSR is under pressure from operational disruptions. Retail apparel companies are exposed to lower discretionary spending, while MMF textile players face crude-linked cost pressure.

Margins of the cement sector companies are likely to compress as input costs rise. Ceramic tiles players are navigating fuel supply disruptions.

In contrast, cotton textiles, hospitality, pharmaceuticals are relatively insulated with limited direct exposure to trade disruptions.

Cotton textiles benefit from higher spreads despite volume pressure. Hospitality companies face only transient demand softness. While pharmaceuticals players remain resilient with manageable cost pressure. While gold import curbs can affect demand, the inventory value increases for jewellers.

Credit growth across sectors is expected to moderate in FY2027, following strong FY2026 expansion, as inflationary pressure weighs on demand and tightens liquidity.