Daily Voice: India likely to be beneficiary of ongoing tariff trade talks, focus on domestic sectors than export-oriented segments, says Bajaj Finserv AMC's Nimesh Chandan

What is your view on the tariffs announced by the Trump administration? Do you expect more tariffs to be imposed in the coming months?

The announcement of tariffs on all imports from all countries will ultimately lead to inflation in the US. The high tariffs that have been announced will result in higher prices for those products in the US, and these costs will ultimately be borne by US consumers. US corporations with global supply chains will also bear the brunt of these tariffs. They may be able to pass on the tariffs to consumers, or they will have to take a hit on their own profits. Most likely this is this should be worst case tariff. Trade negotiations should dilute some tariff impacts.

Have you upgraded consumer stocks after their recent underperformance?

We believe the consumer sector is currently placed at an attractive valuation, considering its long-term growth potential. Companies with strong competitive advantages and generally healthy balance sheets and cash flows in this sector are particularly appealing. Despite not participating in the recent bull run, many consumer sector stocks have seen a period of consolidation over the past two years.

In recent months, several triggers have emerged that are likely to lead to better growth prospects for this sector going forward. Fiscal policy has shifted towards a more demand-focused approach. The budget has announced tax benefits, which are expected to boost consumption. Additionally, the central bank, through its monetary policy, has taken steps to ease liquidity and lower interest rates. This, in turn, will help the consumer sector by improving affordability and boosting demand.

With companies that have long-term growth prospects and competitive advantages now available at good valuations, this sector becomes an attractive overweight for us. With External sectors (export-oriented) witnessing tariff related noise, the focus of the market participants will move to domestic sectors like consumption.

Do you think the potential for rerating large private banks is now limited?

We are positive on large private banks. In the coming year, we see a revival in credit growth, improvement in deposit growth, and good asset quality. Within large private banks, this segment has healthy asset quality. This segment has been de-rated due to liquidity pressures or liquidity crunch in the system in the last year. Valuations are now attractive.

Below the long-term average, this sector is very attractively poised for an up move. The trigger, however, may come sometime towards the end of the first half when people start seeing numbers in terms of credit growth and deposit growth coming by that time.

Will PSU banks remain undervalued?

We are positive on some of the large PSU banks as we see better economic growth in 2026 compared to 2025. Many of these large public sector banks have a strong deposit base and a healthy asset book. Some of them are also at a very attractive dividend yield. Hence, we remain positive that the large public sector banks may see a re-rating upward.

Do you see major challenges for the market in FY26 that could prevent the indices from reaching new record highs?

We are likely to see better GDP growth in 2026 than in 2025. Nifty earnings growth is also likely to be better in 2026 compared to 2025. Fiscal and monetary policy will provide a demand boost to the economy. It looks like the stage is set for India to continue its bull run. While it is difficult to say whether we will reach new highs within 2026, it is reasonable to say that from this level on, equity markets are poised to deliver healthy returns to investors.

Apart from the expected repo rate cut, what other key aspects should be watched in the April policy meeting by the RBI?

India is favourably placed within the tariff discussions going on with the US and other countries. However, due to the uncertainty regarding the actual tariffs that will finally be implemented, we will see global market currencies being volatile. The central bank will also keep a watch on our currency, how it is performing vis-à-vis the basket of other currencies and the dollar and will appropriately take actions in the near term. Over the longer term, India is likely to be a beneficiary of the ongoing trade talks. Beyond the near-term volatility, Indian economy and businesses are on a healthy growth trajectory. RBI has elbow room for deeper rate cuts and to keep liquidity in positive zone.

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