India-US trade deal timeline uncertain; limited impact expected on Indian equities

Traders have blown hot and cold on the AI trade in recent weeks, worried about returns on investment and the technology's potential to upend entire industries, yet hesitant to sit on the sidelines

• Uncertainty grows over timing of India-US trade deal and tariff clarity
• Fund managers say Indian markets unlikely to react sharply to tariff news
• Experts urge investors to focus on long-term fundamentals, not trade headlines

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Uncertainty over the timing of an India-US trade deal has increased, with fund managers signalling that expectations of a near-term agreement have weakened and that even prolonged delays or a sudden announcement may not materially shift Indian equity markets.

The US Supreme Court did not issue a ruling on Friday on the legality of President Donald Trump’s broad tariff regime, prolonging clarity on whether existing tariffs stand or could be overturned after legal challenges. Meanwhile, legislation under discussion in the US includes provisions for punitive tariffs of up to 500%, which could severely impact India’s exports if enacted.

Speaking at CFA Society's India Investment Conference earlier in the day on Friday, WhiteOak Capital's Prashant Khemka said he had been hopeful “till a couple of months ago, based on all the comments and these things,” but added that the probability of a deal being concluded soon now appears to be declining. “At this point in time, from whatever little I know, I’d be happy if it’s in this calendar year," he quipped.

Khemka also highlighted the legal uncertainty surrounding the US tariffs, noting that the Supreme Court “seems extremely apprehensive about overreach,” and that some tariffs could ultimately be challenged. Even if tariffs are rolled back or moderated, he cautioned, the market should not assume an automatic positive reaction, given the wider set of macroeconomic and liquidity factors. He also acknowledged sector-specific pressures, saying he still hopes a deal is announced, noting that some sectors, like textiles, are really under pressure.

Fund managers noted that markets have so far treated tariff developments with limited effect.

When asked about areas in the market that still offer opportunities despite trade tensions, Carenlian Capital's Vikas Khemani emphasized the importance of looking at companies rather than sectors in general. “In every sector that we don’t like, there are companies that we like, and vice versa. You have to drill down to a company-specific basis,” he said. He also noted the limited macro impact of trade tensions, pointing out that “US exports are less than 2% of GDP. India grows that much in a quarter.”

Beyond tariffs, fund managers highlighted a broader structural shift in the global economy. “This is not about tariffs,” HDFC AMC's Chirag Setalvad said. He added, “The bigger trend is for countries to now look out for themselves. America looks out for itself, Europe looks out for itself. We are no longer in globalisation.”

Even if tariff issues are resolved, Setalvad said, “It’s not that if tariffs go, everybody’s going to hug each other again… There will be a brand-new concern that will be obsessing us.”

Khemka noted that deep corrections typically occur only when there is widespread economic damage.

“Markets generally go down very sharply when there’s a widespread bankruptcy risk,” he said. Rather than reacting to trade negotiations or tariff headlines, fund managers urged investors to maintain focus on long-term fundamentals. “You just have to invest systematically and think in a long-term horizon. Every once in a while, when there’s a crisis, take advantage of it,” Khemka said.

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