Daily Voice: Export oriented companies can be dark horse as valuations moderated given uncertainties, says Equirus Asset's Sahil Shah

The recent development on May 12, where the US and China agreed to de-escalate their tariff dispute, is a constructive step. Tariffs have now been scaled down to 30 percent on US imports and 10 percent on Chinese imports, providing a 90-day window for further negotiations. This truce is welcome news for the global economy. Historically, uncertainty around US-China trade tensions has had a direct bearing on global equity and commodity markets. While volatility may persist until a comprehensive agreement is finalized, the current de-escalation signals a positive shift that should support risk assets?

Additionally, would it be a significant blow to China if it fails to secure a trade deal with the US?

China direct export to US is close to half a trillion (in USD terms) which is 2.8 percent of China’s GDP, but indirect exports and manufacturing base of Chinese companies exporting to US is in addition to this. China's economic model over the past decades has been heavily reliant on capital formation and export-led growth.

With infrastructure and real estate investment now tapering, exports remain a crucial pillar of its economy. A breakdown in trade relations with the US would risk exacerbating the slowdown, making a favourable resolution imperative for China’s economic stability.

Do you believe the worst of the India-Pakistan tension is behind us, and the market is now positioned for a new leg of up-move in the coming weeks?

The geopolitical situation between India and Pakistan has notably calmed with a ceasefire now appearing to hold. Historically, Indian equity markets have shown remarkable resilience in the face of such short-term geopolitical tensions. While market corrections in similar past episodes ranged from 5 percent to 15 percent, they were typically followed by swift recoveries.

With India-Pakistan concerns easing, what are the other key challenges facing the market, and could they potentially derail the ongoing rally?

Unless the India-Pakistan conflict re-escalates or persists over a prolonged period, its direct impact on market performance should remain limited.

Which sectors are you bullish on despite near-term concerns?

We remain constructive on Financial Services, IT and selective names in consumption space is where valuations are reasonable and growth is likely to recover. Export oriented names can be a dark horse as valuations have moderated given the uncertainties.

What is your take on the March quarter earnings season? Do you foresee any major revisions to earnings estimates for Q1FY26, and what are the expectations for the quarter?

The March quarter earnings season has largely been in line with expectations across sectors. Several non-urban consumption companies have posted robust numbers, suggesting a gradual recovery in discretionary spending. Financial services have performed as anticipated, with a stable outlook for net interest margins (NIMs) beyond the immediate quarter. On the other hand, export-oriented companies have adopted a cautious stance, with some deferring guidance due to external uncertainties. At this stage, we do not foresee significant earnings downgrades for Q1FY26, particularly for domestic-facing sectors.

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