Moneycontrol Pro Weekender | Will April 2 trump All Fools’ Day?

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Dear Reader,

The first of April is also known as April Fools’ Day or All Fools’ Day, a day reserved for practical jokes, pranks and hoaxes. A notable instance, among many such gems, is the American public broadcaster NPR, which on April 1, 1992, declared that Richard Nixon, who resigned as president in 1974 amid the Watergate scandal, was running for president again, with the slogan, “I never did anything wrong and I won’t do it again.’’

Given such wonderful jokes, it’s no wonder that some of us want to extend the hilarity. In Scotland, for instance, April Fool is a two-day affair, with the second day being called ‘Taily Day’. As this article informs us, the second day “is generally devoted only to laughs involving backsides’’. It adds, “Pinning a paper tail onto someone’s posterior — or taping a “kick me” sign on an unsuspecting friend’s back — is thought to be hilarious.’’ This year, of course, the whole world is holding its breath on the practical jokes the Trump administration will play on April 2, and how badly the kick to the backside from the ‘reciprocal tariffs’ will hurt.

Of course, Trump has stolen some of the reciprocal tariffs’ thunder by announcing  25 percent tariffs on autos and auto parts, and we carried out a comprehensive analysis of which Indian companies will be affected and whether investors should avoid them. Earlier this week, Trump slapped secondary tariffs on countries importing crude oil from Venezuela, a move that we said was the latest arm-twisting effort by the US government to force other countries to fall in line with US foreign policy. Oil prices rose as a result. This FT story, free to read for Moneycontrol Pro subscribers, says that, given the US president’s oft-repeated utterances about lower oil prices bringing down inflation, “if you are confused about Trump’s energy plan, you are not alone”.

Indeed, the confusion extends to Trump’s entire plan, if he has one. This FT article tries to discover the philosophical roots behind Trump’s policies, which it calls a ‘Dark Enlightenment’. Good luck with that. Former Morgan Stanley honcho and China watcher Stephen Roach has been quoted as saying that Trump’s policies resemble those of the Chinese Cultural Revolution in the sixties and seventies, which led to massive chaos. Incidentally, the colourful slogans of that period -- ‘Bombard the Headquarters’, ‘Criticise the Old World and Build a New One’ and ‘Down with the Four Olds (old customs, old culture, old habits, old ideas)’ -- illustrate the radical spirit of the times. At least as far as slogans go, the MAGA movement could adopt a similar style -- ‘Drain the Swamp, Save the Republic’, or ‘Build the Wall, Save the Nation’.

Nevertheless, we wrote about Emkay Research’s analysis of the sectors most at risk from Trump’s likely reciprocal tariffs on India and the key stocks to watch on April 2 .

It’s a moot question, though, whether April 2 will bring the much-needed clarity. The tariffs announced are likely to be the beginning of negotiations and possible retaliation by some countries. There could well be further rounds of tariffs. And it will take weeks for businesses to work out the effects, not least because of supply chain complications. Or will April 2 spark a relief rally, as some of the uncertainty is dissipated?

As for the Trump administration’s stated objective of shifting production to the US, Nomura points out that the average hourly wage in India is $1.5, vs ~$2.5 in Mexico and $15 in the US. Also, if the idea is to build auto factories in the US, why hike tariffs on steel and aluminium? Copper prices have zoomed on fears of tariffs, and we wrote about its implications here. Martin Wolf’s column in FT had the headline, ‘Trumponomics is putting lipstick on a policy pig’. Read it here on Moneycontrol Pro.

Indeed, US recession fears have returned, with JP Morgan’s chief economist putting the odds at 40 percent. Surprisingly, despite the tariffs imposed on Canada and Mexico, their MSCI equity indices are up 2 percent and 11 percent, respectively, in USD terms, while MSCI USA is down 3.3 percent year to March 27th. We wrote that foreign investors’ inflows into India lately have been the highest across Asian markets. A note by Jefferies this week said, “Some investors have already started to reduce the UWT (underweight) on India. FPI selling should decline / could turn net positive and some initial signs are visible in numbers.”

One reason could be that India is a predominantly domestic-oriented economy. The range of estimates of the hit to India’s GDP from reciprocal tariffs range from 5 to 60 basis points, depending on their scope and severity. In fact, the domestic-external divide is clear in the markets. While we wondered whether this IT firm could maintain its growth momentum, or how Trump’s tariffs are changing IT companies’ demand outlook, we also said this affordable housing stock has reasons to command higher valuations, we analysed whether financial stocks are on the cusp of realising their investment potential, and even in the external sector, we discussed the implications of L&T’s unprecedented move in global energy.

India’s challenges are domestic, and we looked here at the main worry in India’s economic outlook, as seen by the finance ministry’s monthly review, and at CareEdge Ratings’ analysis of states’ growth ambitions clashing with rising debt.

And finally, in an attempt to draw historical parallels, we asked the question: When was the last time policy uncertainty was so high?

Perhaps this is the right time to quote Samuel Beckett’s famous play, ‘Waiting for Godot’: “In the immense confusion one thing alone is clear. We are waiting for Godot to come.”

And while we’re waiting, I’ll leave you with the Leonard Cohen song ‘Everybody Knows’. Here’s how it goes:

‘Everybody knows that the dice are loaded

Everybody rolls with their fingers crossed

Everybody knows the war is over

Everybody knows the good guys lost

Everybody knows the fight was fixed

The poor stay poor, the rich get rich

That's how it goes

Everybody knows.’

Cheers,

Manas Chakravarty

In case you missed them, here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity and forex markets:

Stocks

Does this mid-sized private bank offer good risk-reward potential? SBFC Finance: How justified is the valuation of this stock? Jyothy Labs, Mas Financial – Contrasting business performance and stock show, Will Germany’s fiscal boost fire up Indian defence stocks? Why this mid-sized IT company deserves attention amid its performance turnaround, Apeejay Surrendra Park Hotels, Delhivery, Control Print, ION Exchange, Should this auto ancillary find a place in your long-term portfolio? Sky Gold-will the glowing performance continue?

Markets

The key drivers behind March’s market rally

How SEBI's FPI disclosure rules will impact foreign flows

MF SIP investors are falling into the market timing trap

Who are the market leaders in this rally and why

Will Turkey’s ban on short selling succeed?

Financial Times

Why ships are the new chips

China is suffering its own ‘China shock’

Companies and sectors

April Price Hikes: Will passenger vehicle sales stall further?

Neogen Chemicals

Share of kiranas in FMCG is declining, which channel is gaining share?

Will realty firms achieve pre-sales guidance for FY2025?

EPL gets another stab at growth acceleration

What’s powering the rise of data centres?

Are NBFCs back to being reckless in unsecured retail lending?

What is the sharp slowdown in fintech loans warning us of?

Retail security redemption surge: what it means for banks, ARCs

Economy & Policy

Is a beneficial tariff deal on agriculture with the US possible?

What do leading monsoon indicators suggest for this season?

Flash PMI’s low selling price inflation will help MPC cut rates as Trump tariffs loom

Bloom or gloom — What will AI spell for the Indian job market?

A billion-tonne coal milestone highlights India's energy dilemma

What does inward remittance data tell us?

Will RBI’s new priority sector guidelines make a difference

India’s solar power sector has a new headache: rising atmospheric pollution

Pro Economic Tracker

Tech & Startups

Open Source in tech: What India can learn from China

India's IT services firms see over 60% of new deals slashed in tenure, signaling industry shift

LAP, solar, mutual funds: How digital lenders are experimenting with secured loans

Geopolitics & geoeconomics

Can India handle the policy dilemmas thrown up by Trump, China and the EU?

Can COMAC disrupt the Boeing-Airbus duopoly in global aviation?

The Eastern Window: India’s neighbourhood first policy may need tweaking

Shifting Sands in the Middle East: A new global power struggle emerges

Personal finance

When to sell your investment?

Multi-asset funds: Does diversification work?