Daily Voice | US-Iran tensions contained; India impact from Trump tariff ruling limited, says Prachi Deuskar

Prachi Deuskar is the smallcase Manager and Co-Founder of Lotusdew

• US Supreme Court’s ruling is a major blow to President Trump’s plans to wield tariffs
• Direct risks for India from Supreme Court ruling on Trump tariffs limited
• Continued global uncertainty feeds the sideways market movements

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According to Prachi Deuskar, smallcase Manager and Co-Founder of Lotusdew, the risk of a prolonged war between the US and Iran is limited, as higher oil prices would also hurt US consumers.

She added that, given the currently benign inflation environment, India has sufficient buffer to absorb any oil price pressures. Therefore, she does not see the situation as a major cause for concern.

Meanwhile, she believes that the direct risks for India arising from the Supreme Court ruling on Trump tariffs are limited. “The progress India and the US have recently made on a trade treaty shields India, to a large extent, from the fallout of this uncertainty. Further, in light of the Supreme Court (SC) ruling, India is likely to renegotiate certain aspects of the trade treaty to secure more favourable terms,” she said.

Supreme Court strikes down Trump’s tariffs in Friday's hearing. What does this mean for India, the US, and others?The 

US Supreme Court’s ruling is a major blow to President Trump’s plans to wield tariffs as a strategic weapon against allies and adversaries alike. However, he may look to find other ways of imposing tariffs. This increases the global uncertainty as many countries that were looking to incorporate the new tariff reality in their outlook and work with it, now find themselves staring at a new, ambiguous tariff regime.

However, the direct risks for India are limited. The progress India and the US have recently made on a trade treaty does shield India from the fallout of this uncertainty to a large extent. Further, in light of the Supreme Court (SC) ruling, India is likely to renegotiate some aspects of the trade treaty for more favourable terms. Thus, on the whole, this is a no-impact or mildly-favourite-impact situation for India.

What could be Plan B by Trump, especially after the SC ruling?

The SC ruling is narrow in the sense that it finds that the current law used the levy tariffs does give the USpresident such an authority. Thus, Trump would look for other legal avenues to impose tariffs, including getting them approved by Congress. However, the extent to which such actions are possible is not clear immediately. Hence, the added global uncertainty.

Do you think the market will remain in consolidation or trade within a range until IT and FMCG stocks regain momentum?

IT and FMCG have underperformed recently, and their recovery is crucial to the overall market direction. However, the continued global uncertainty also feeds the sideways market movements.

Do you believe economic growth is likely to remain healthy next year, with nominal GDP expected to stay in double digits?

India continues to be the only major economy delivering robust growth. Macro fundamentals remain strong with strong growth in industrial production and bank credit growth. While the urban consumption shows some softness, the rural demand remains firm.

India Inc’s CapEx (capital expenditure) is likely to pick up, adding further boost. The benign inflation environment will allow the RBI to maintain low interest rates make the environment further conducive to growth. Over 2026-27, we expect the real GDP to grow by around 6.5-7%. Given the moderate inflation, this may translate to the nominal GDP growth of 9.5%-10.5%.

Are you bullish on the banking sector as a whole, given the expectation of double-digit loan growth?

Yes, the recent CRR cut from 4% to 1% for Infra will help. Also, renewed capex will drive credit growth. This augurs well for the banking sector.

Do you think there will be no major near-term challenges for IT companies in terms of revenue generation?

IT service companies have secured cash flows that are not easily disrupted by near term issues. However, the challenge is the long-term sustainability of such cash flows.

Are you concerned about geopolitical tensions between the US and Iran, which have pushed oil prices higher and raised inflation concerns?

A prolonged conflict between the US and Iran will keep the oil prices high, in turn raising India’s energy spending and feeding into inflation. Given the repeated failures of diplomacy and the combustible domestic situation in Iran, the evolution of the conflict remains unpredictable.

Yet, the risk of a long, drawn-out war is limited, since higher oil prices would hit US consumers as well. Further, given the very benign inflation environment, there is a buffer for India to absorb this price pressure. Thus, we do not see this as a cause for major concern.

After reviewing the December quarter earnings, do you believe confidence in an earnings growth recovery has increased?

Earnings are still mixed, and we continue to remain stock-specific.

If yes, which sectors do you expect to lead the anticipated earnings recovery?

We believe that there are bright spots in each sector to be picked through careful selection. But overall, the financials show the promise to lead the earnings recovery.