Daily Voice: Despite steep tariffs, OmniScience’s Vikas Gupta sees strong earnings recovery in 2HFY26

As you are aware, our portfolio is designed based on the Scientific Investing Framework. Fortunately for us, companies with US exposure were not fitting the criteria even before the tariff announcements, and hence our portfolio was already less exposed to the tariffs. So there is no need for us to change the portfolio in response. But, of course, if it were exposed, we would definitely consider responding with potential changes.

Is it better to stay focused on domestic-oriented sectors rather than export-driven ones? Does this mean export-oriented sectors should now be completely avoided?

Definitely, it is safer, in the near term, to have a portfolio of more domestic-oriented companies and sectors. But we would not go so far as to say avoid export-oriented companies completely, if one is knowledgeable and willing to take risks.

If one has insights into the US-exposed exporters versus the ones exporting to other countries but not the US, and they find opportunities there, it might not be a bad decision. This assumes that the companies have strong balance sheets, persistent competitive advantages, large growth opportunities, and are available at significant discounts to their intrinsic values; in short, if they fit the Scientific Investing Framework. However, our current portfolio doesn’t have too many such companies.

Since this move is widely seen as one of Trump's negotiation tactics, do you believe the final tariff rate could be reduced to 15–20%?

Yes, it is quite likely that a year from now the tariffs will be much lower. In the past, even with sanctions after the 1998 nuclear tests, it was nearly over within a year or so. We think eventually lower tariffs will prevail, or it could even be the dismantling of tariffs completely. However, this depends on the geo-strategic play going on.

Currently, moves are afoot that are attempting to force India to either choose to be in the US-controlled bloc or be against it. India, as its history shows, has always tried to avoid becoming part of blocs. This will take a few quarters to stabilize. Until then, we are modelling about a 60% chance of it being lower a year from now. But in our perspective, there is a 40% chance that tariffs could remain high even a year from now.

Do you genuinely foresee a 40–100 bps impact on India's GDP growth due to these tariffs?

Yes, there could be some impact due to the multiplier effect of the exporters' earnings in USD and then spending money in the Indian economy, which would now be reduced, and so this could spiral to a reduced growth rate impact on the economy. Precisely how much the impact is difficult to say. But 40-100 bps seems about right.

Do you expect any major policy announcements from the government to mitigate the impact on affected sectors and protect jobs?

Yes, there will be a response from the Government of India, but they might not make a loud noise about it, since then it would defeat the purpose of the negotiations. The idea is not to give the other side any feedback on if it is working in their favour or not. So, there could be quiet implementation of policies which could help the sectors and jobs. But less likely that it would make front page news.

Despite these hefty tariffs, do you still anticipate a strong earnings recovery in the second half of FY26?

Yes. The tariffs shouldn’t have too much impact on the earnings of most sectors. We think we should continue seeing robust GDP growth, the highest across all major economies, even with the impact of tariffs. Also, earnings should start improving on a cyclical basis soon.

Do you believe the rupee will remain relatively stable and not weaken significantly due to the tariff situation?

Rupee weakening is part of the tools when responding to tariffs. It makes exports cheaper, and thus we may allow the INR to weaken to counter some of the impact of the tariffs and potentially reduced exports to the US.

Some products might still remain competitive when INR is weak. Or we might export to some other markets more competitively instead of the US. Also, with Russian oil, or possibly deals with other oil-producing countries to buy oil using other currencies instead of the USD, a weakened INR might not result in inviting inflation. So a weaker INR is possible.

Going forward, do you expect markets to become less sensitive to tariff threats and remain in a consolidative phase for the rest of the calendar year?

At 50% tariffs, any more hikes in tariffs are not going to have too much impact. Yes, bringing in other goods and services under tariffs or other barriers will have an impact. But if the trade war escalates any further, it is likely going to result in a full-fledged geo-strategic realignment for India against the US. So, the US has to tread very carefully going forward.

India might align with BRICS, etc., to create a non-USD trading strategy within the BRICS+ nations. Also, India might align closer with other countries on defence ties or trading in strategic resources and cross-border investments. We would think it is not in favour of the US to manifest these results. So a turnaround in the US-India relationship should happen soon, but things could be surprising, tactically, in the near term. But this is not about the markets, more about geo-strategy.

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