"India will definitely thrive, not only in the long-term, but also in the near-term and mid-term despite short term pain due to Trump-era tariffs," said Vikas V Gupta, the CEO & Chief Investment Strategist at Omniscience Capital in an interview to Moneycontrol.
According to him, it is likely that the focus will be providing incentives to the impacted sectors to overcome the impact in the near term and find alternative markets in the long term. Government might announce other measures which could include encouraging BRICS/EU FDI, he said.
The only consumption theme they have in the portfolio is housing finance or private banks, he said, adding they also play consumption via some business services companies which provide B2B services to consumption-oriented companies.
Can the better-than-expected growth in Q1 provide confidence for stronger growth from Q2 onwards?
Growth is likely to be strong as the Government of India investment cycle kicks in after a lull during 2024 due to elections. The GoI investments in infrastructure are likely to maintain the growth momentum. The tariff-impacted sectors are likely to cause friction but the quantum of the effect on the overall GDP growth numbers is likely to be low.
To reduce the impact the GoI might have already initiated the process of finding alternative markets for those sectors, as well as, some less-publicised measures which would provide relief to these sectors in the near term.
India might also see increased FDI and JVs from BRICS nations as well as Japan and EU.
Do you believe the chemical sector is currently available at attractive valuations?
Chemical sector is still trading at a PE of 48, which is quite high. Specialty chemicals are trading at PE of 50+, while agrochemicals and commodity chemicals are in 40s. Petrochemicals are probably the only pocket where one could explore for reasonable valuations.
Do you think India can thrive in the long term, even if it experiences short-term pain due to Trump-era tariffs?
India will definitely thrive, not only in the long-term, but also in the near-term and mid-term. Trump tariffs make prices higher for American consumers and not Indians. Americans have to pay higher for all the goods that Trump has put tariffs on. It is possible that to be competitive the suppliers might reduce prices to some extent, but given that the US markets were already competitive, most suppliers were probably working at relatively thin margins for many goods and that won’t leave much for reducing prices.
Alternatively, the governments of those supplying countries have also already been using incentives and other tools to support their exporters to US markets, so they too won’t have too much that they can do to mitigate the impact of tariffs to their price competitiveness.
Rather, the impact of tariffs might be that the Indian exporters will try to sell the goods within India, thus pushing domestic prices for their goods lower. Further, just like Indian exporters trying to find non-US markets in BRICS/EU etc., other tariff-impacted nation’s exporters would also try to sell to India. Thus, supply to rest of the world, i.e., other than the US, is likely to be high for a constant demand, thus reducing prices in the RoW including within India.
Is it realistically possible for Trump to bring manufacturing back to the United States through the 'Make America Great Again' initiative?
For some high value goods and strategic sectors manufacturing might be able to shift to the US, especially if it is using Robots and Automation or Industry 4.0. For manually intensive sectors it is highly unlikely and such an attempt will result in a highly inflationary and globally uncompetitive economy for the US.
Do you expect the market to consolidate over the next six months — at least until the India-US deal is announced or the tariff impact is normalized?
Markets have now moved past the expectations of a India-US trade deal. The probabilities, prima facie, look much lower that it would happen in the near term. So the markets are not looking at that. Rather, the focus would be on India-EU nations, India-Japan, India-Russia, India-Brazil and possibly even India-China deals. Some of them might never be announced as full-fledged trade deals but might see ease of doing cross-border business or joint ventures or other forms of FDI or collaborations.
Besides GST, what other policy levers do you expect the government to use to offset the impact of US tariffs?
It is likely that the focus will be providing incentives to the impacted sectors to overcome the impact in the near term and find alternative markets in the long term. Low inflation will also allow RBI to cut rates. Government might announce other measures which could include encouraging BRICS/EU FDI.
Have you started positioning for consumption themes in your portfolio?
The only consumption theme we have in the portfolio is housing finance or private banks. We also play consumption via some business services companies which provide B2B services to consumption-oriented companies.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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