The way US markets have reacted in the last few days, it seems there is a lot more pain to come in the US markets, said Raghvendra Nath, the managing director at Ladderup Asset Managers in an interview to Moneycontrol.
According to him, a significant downturn in US shall mean that FPIs may take some risk off the table, and in such a scenario FPI selling could intensify in India too. So a rally from here is highly improbable at least for the next four to six months, he believes.
Having said that, India has already experienced significant correction in most small, mid and large cap stocks since September last year. In view of that, the scope of further deeper correction in India seems unlikely right now, said Raghvendra, who leads the private wealth management business with more than 30 years of corporate experience.
After higher-than-expected tariffs, is it better to stay away from the IT sector at least until the dust settles?
The tariffs announced on April 2 by the Trump administration have been harsher than expected and if these tariffs persist, it will have a very negative impact on the US Economy. Generally the consumer sentiment has been weakening for the last couple of months in anticipation of these tariffs and the pruning of the workforce in various government departments. The Tariffs announced now only further dampens the consumer sentiment. Besides the sentiment, there is a very high risk that US Economy faces sharp slowdown or even recession, as the inflation spirals upwards.
In a scenario like this, it is to be expected that most US Corporation would try to tighten their purse strings. And IT spends are generally amongst the first things that get impacted. That is the reason why most IT companies in India have seen a price correction in the last few days. So yes, it is better to stay away for some time till clarity emerges on the way forward.
Do you see the possibility of a downward revision in tariff rates, considering Trump is open to negotiations?
Difficult to say at this stage. Despite huge outcry in United States against the possible effects of such tariffs, Donald Trump has stuck to his guns. He has repeatedly said that there would short term pain in the Economy and he believes that such pain has to be endured in order to improve the local manufacturing. There could be some climbdown from the current levels but knowing how Trump has acted in the past, there could be some other measures that he may resort to instead of tariffs. One things seems somewhat certain – The global trade would continue to face challenges in the next few months or may be even longer. And I think, most countries would have to brace for these challenges.
Do you foresee a major impact of tariffs on India Inc.'s earnings in the coming quarters, or is it limited to just a few sectors?
Of course companies that are exporting to United States would have a significant impact on their earnings if these tariffs persist. Industries such as gems and jewellery, textiles, auto ancillaries, electrical machinery and equipment manufacturers, and chemicals have a lot of exports to US and they would pressured to reduce the cost of these products resulting in compression in margins.
If these tariffs persist for an extended period, sectors like IT services may also be impacted by the slowdown in the U.S. economy. It's crucial to monitor developments and measures adopted by other countries to assess the broader impact on our economy and companies. Let us hope that India successfully negotiates a deal, especially for certain sectors like textiles and chemicals as they could benefit from relatively lower tariffs compared to major exporters like China, Vietnam, and Bangladesh.
Also the earnings in Q4 are expected to be a mixed bag, as we have not seen any significant change in the Economic Activity in comparison to the previous two quarters.
Do you expect the RBI to cut the repo rate in the April policy meeting and signal more cuts in the upcoming meetings?
There is a good probability that RBI may follow up with another rate cut in the April policy meeting. The RBI has been conducting liquidity easing measures through open market operations to ensure efficient transmission of rate cuts. With inflation at 3.6%—within the RBI's target of 4%—the focus should shift towards supporting growth, especially in the context of a volatile global trade environment.
Will the market find it difficult to inch toward its record high, considering Trump is expected to continue making tariff announcements?
The way US markets have reacted in the last few days, it seems there is a lot more pain to come in the US markets. A significant downturn in US shall mean that FPIs may take some risk off the table, and in such a scenario FPI selling could intensify in India too. So a rally from here is highly improbable at least for the next four to six months. Having said that, India has already experienced significant correction in most small, mid and large cap stocks since September last year. In view of that, the scope of further deeper correction seems unlikely right now. However, the way the global sentiment moves from here is highly uncertain.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
