Until we see the fine print, everything is speculation: DSP’s Sahil Kapoor on trade deal impact

Kapoor said the deal should be viewed in context. Prior to the latest tariff discussions, India already faced average tariffs of around 12% in the US, with non-commodity exports at about 9.5%, while agricultural commodities faced higher duties.

• India-US trade deal boosts sentiment but sector benefits remain unclear
• Corporate earnings growth weak; export growth structurally low
• Indian bonds seen as more attractive than equities currently

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The proposed India–US trade agreement has eased market sentiment but it is too early to take investing calls, said Sahil Kapoor, Head of Products and Market Strategist at DSP MF, cautioning against over-interpreting tariff headlines in the absence of fine print. He made these comments on the sidelines of DSP Mutual Fund event to launch their DSP Multi Asset Omni Fund of Fund.

Kapoor said the deal should be viewed in context. Prior to the latest tariff discussions, India already faced average tariffs of around 12% in the US, with non-commodity exports at about 9.5%, while agricultural commodities faced higher duties.

“People are celebrating an 18% tariff headline, but in many cases we may still be worse off than where we started,” Kapoor said, using an analogy to explain this: “If two investors both have Rs 100 crore today, but one came down from Rs 200 crore and the other stayed constant, the second investor is clearly worse off, even though the absolute number is the same.”

Competitive edge still uncertain

According to Kapoor, the key question is whether Indian companies can absorb tariffs and remain competitive against China, Vietnam, and other export-heavy economies.

“In some pockets, the answer is yes,” he said, pointing to chemicals, where rupee depreciation combined with tariff easing could help margins. “But is this a broad-based jackpot? No. Only time will tell.”

He added that without clarity on sector-wise applicability, any assessment remains speculative. “There is no document yet specifying which sectors benefit from the US deal or what the 18% actually applies to.”

Sentiment positive, earnings still weak

Kapoor stressed that while the agreement has helped sentiment, it does little to address the real concern—corporate earnings.

Of the 260 companies that have reported results so far, earnings growth has been just 9%, with 25–40% of companies reporting earnings decline. “That’s a big problem. Earnings recovery is the real trigger for equity markets,” he said.

He also flagged that export growth across major sectors has been structurally weak. “India has 10 large export segments, and not one has delivered more than 4% CAGR over the last 10 years,” Kapoor said, citing engineering goods, petrochemicals, textiles, and electronics.

While electronics exports show an 18% gross CAGR, net exports tell a different story. “Once imports are adjusted, growth falls to around 6%,” he said.

Bonds look more attractive than equities

In contrast to equities, Kapoor believes Indian bonds currently offer a compelling non-linear opportunity.

“The best trade today is buying bonds,” he said, noting that even if foreign outflows merely stop, liquidity conditions would improve meaningfully. With a 150 basis-point gap between repo rates and 10-year yields, 40-year low inflation, and despite the government’s Rs 1.5 lakh crore increase in gross borrowing, bonds present favourable risk-reward dynamics.

“If foreign flows stabilize, the RBI will be able to manage liquidity much better,” Kapoor said.