Optimistic on India given favourable position among EMs, shielded from tariff woes: Yi Ping Liao, Franklin Templeton

Franklin Templeton

In a recent webinar, Yi Ping Liao of Franklin Templeton shed light on India’s future outcomes, and expectations Indian and foreign investors can have from Indian markets, given the volatile geopolitical scenario amid U.S. President Donald Trump's tariffs.

In the webinar, Liao said she feels optimistic about India’s performance for the future owing to India's optimistic position in the global markets. India enjoys this superior position presently, as per Liao, as unlike nations such as Korea or Taiwan, India's economy is more domestically driven and depends more on domestic demand.

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The large domestic market shields the economy from the effect of tariffs, bringing in a more limited and prudent effect on its growth. The Indian stock market is also less driven by foreign flows and investments, its greater dependency lies upon domestic asset allocation considerations and domestic flows.

The tariff war also brings in another positive for India, which is its deflationary effect on domestic commodity prices. Liao added that even if delayed reciprocal tariffs are imposed, sectors that are presently under the radar, such as service sectors like IT, will not be subject to these tariffs; as for export oriented sectors such as Electronics Manufacturing Services (EMS) will be relatively better positioned as opposed to those in China

Liao weighed in on the re-negotiations aspect of the situation as well. She posits that India will be in a more advantageous position to negotiate a trade deal with the US quickly, as opposed to its neighbours owing to reduced tariffs on American imports as well as more energy purchase commitments to the US.

Liao concluded by noting that India’s geopolitical importance and its status as an ally to the American people also plays a role in the outcome and future trajectory  of such factors. The possible unwinding of U.S. exceptionalism and dollar weakness is a key risk, potentially leading to some shifts in assets from the U.S. to the rest of the world.

Asian equities look very compelling in this context, as the region continues to be the engine of global growth. Valuations for Asia ex-Japan still look inexpensive compared to the rest of the world.

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