Short Call | What would happen if Trump Tariffs were imposed on India? VRL Logistics, Info Edge in focus

Representative image

Donald Trump’s sweeping trade tariffs have sent shockwaves across global markets, and India is no exception.

While India hasn't been directly targeted, Trump had called it a tariff abuser during his election campaign last year. The ripple effects of tariffs on China are unavoidable. The fear of a global trade war is casting a long shadow over Indian markets, with uncertainty looming large.

If tariffs are imposed, their impact on India could be significant, given the U.S. is India’s largest trading partner, with bilateral trade surpassing $117 billion in 2023. India is especially susceptible to shifts in U.S. trade policy, as the American market remains the largest destination for Indian exports, both goods and services. Of particular importance is the fact that the U.S. is the only country with which India maintains a trade surplus, making it a vital source of U.S. dollar earnings.

“My worry is if they bring up the tariffs for BRICS countries to ensure that they don't move away from the dollar as a reserve currency, then India being a part of it will get an impact, for sure," an analyst told Moneycontrol.

Experts, however, are quick to allay fears on pharma and IT companies, given the US' high reliance on India. Given the dependence on pharmaceuticals, particularly life-saving drugs, it is unlikely that Trump would impose significant tariffs on this sector. Similarly, the IT sector is less likely to be affected, as the U.S. heavily relies on Indian services.

On the other hand, the gems and jewellery sector could be vulnerable, as it is discretionary and one of India’s largest exports. This sector could face challenges if tariffs are imposed, especially for unorganized players in India. Even auto ancillary companies are at significant risk since they have production units in Mexico. Experts suggest that the US might urge Indian suppliers to establish manufacturing units there to evade barriers.

VRL Logistics (Rs 519.95, +11.4%)

Shares surge after 4x jump in Q3 net profit.

Bull Case: Successful price hike, investments in expanding branch network shall drive growth ahead, Nuvama believes. Healthy revenue growth coupled with robust margin profile shall augur well. Nuvama feels these are the right levers of growth and the valuations looks reasonable from a risk reward perspective.

Bear Case: Volume growth continues to be a concern that was offset in Q3 by price hikes, however, that may not be the case for upcoming quarters. Slower uptick in volumes pose significant threat to margins, especially at a time when the company has planned to incur Rs 1,500-1,600 crore capex.

Info Edge (India) (Rs 8,050, +1.3%)

Reported strong Q3 earnings.

Bull Case: Billing growth continues to report an improving growth trajectory with revenue growth catching up. Margins have improved across businesses. The management increased its marketing investments by Rs 5 crore QoQ in Jeevansathi business for content marketing and brand recall purpose.

Bear Case: Any slowdown in IT hiring will impact the firm. Further, slower than anticipated scale up of non-recruitment segments will also have an impact. Continuing losses in the real estate and matrimony segments as a result of high competitive intensity can weigh on margins.

(Inputs from Vaibhavi and Zoya)