Donald Trump’s recent tariff threat, including those linked to Russian oil imports, should be seen more as negotiation tactics than long-term policy commitments — and India is likely to emerge relatively unscathed, said Prashant Khemka, founder of White Oak Capital in an exclusive conversation with Moneycontrol.
“It is a negotiating tactic – he is trying to play two cards at the same time. One with Russia on the Ukraine war. Second, India trade talk in final stages,” Khemka said, noting that using tariffs linked to Russian oil serves a “dual purpose in the Trump world – Russia political battle as well as India trade talks.”
Markets aren’t pricing in a scenario where tariffs on Indian exports remain as high as 50%. “Where it ends is hard to say, but below 25% is a reasonable expectation,” Khemka said. “In all likelihood, the 25% Russian oil-led tariff will go away, which will be “decent enough” outcome for India.”
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Still, the optics will matter just as much as the outcome. “It’s not only important for the trade deal to be a win-win – it should also perception of win-win for both sides, US and India, because the decibel levels have been raised so much.”
Khemka believes Trump’s approach is not as erratic as it appears. “He has been fairly predictable in his approach to negotiation.”
He dismisses the idea that India’s navigation of these negotiations will be seen by foreign investors as a failure to manage geopolitical complexity. “The Trump negotiation is unlikely to be seen as India’s inability to navigate the geopolitical set-up.”
Regardless of the final tariff outcome, Khemka says India’s premium market valuations are underpinned by structural strengths. “Even before Trump and Putin, India has always commanded premium market valuations compared to other countries, because of superior governance, profitability, and growth – apart from democracy. Democratic countries often enjoy a higher premium as investors prefer them over authoritarian regimes.”
He believes India’s global standing is well intact. “This ability to navigate a multipolar world will remain a structural positive for India.”
On market direction, Khemka is not expecting fireworks over the next 12 months. “We enjoyed uninterrupted stock market gains since March 2020, though there was a lull from late 2021 for 18 months,” he said. “They have periods of uptrend, downtrend and when they do nothing, but these become clear only in hindsight. I would expect no big up or down moves over the next 12 months – it might just remain placid.”
If tariffs settle in the teens or below 20%, he sees that as a neutral-to-positive outcome. “It will be good news, as other countries like Bangladesh and Vietnam have also settled around the same levels.” But if duties hover around 25%, “export-focused sectors like textiles, apparel, garments will suffer seriously. At 25% per cent, companies will have to contend with cut-throat competition.”
That said, the direct impact on Indian equities is likely to be narrow. “The direct risk to stocks is a very narrow segment of the market,” he noted. But elevated tariffs could still cast a shadow on broader macro trends. “High tariffs will surely make an impact on the economy – on the financial sector, consumption and so on – although it may not be a very big impact.”
As for portfolio stance, Khemka remains fully invested. “We remain fully invested in both client portfolios as well as personal capacity. Deploy cash as soon as we get inflows,” he said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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