Despite the jolt from Donald Trump’s tariff rhetoric and its implications for global trade, Prashant Khemka, founder of White Oak Capital, believes the worst of the disruption may already be priced in. “We could already be seeing the ‘Trump bottom’ in markets,” he said. “What matters is not just the magnitude of bad news, but whether the next piece of news is better or worse than expected. And after such a dramatic reset in sentiment, the incremental bad news may be less bad—or even mildly positive.”
Markets tend to discount future developments well before the economic data reflects them. “During COVID, debts kept piling up, earnings were uncertain, but markets bottomed on March 23rd and started rallying. It was never about waiting for all the data to improve,” Khemka said.
He sees the potential for a similar dynamic now. “One negotiation—Trump announces he’s brought down tariffs from 30% to 15% on some segment—and you’ll see a huge rally. The negative effects of protectionism may continue in the real economy, but markets will react to marginal shifts in the narrative.”
That, he adds, is why long-term return expectations shouldn’t change much. “Low double-digit returns from Indian equities and high single-digit returns from US equities remain reasonable over time. That’s in line with nominal GDP and dividend yields.”
India’s earnings outlook still healthy, with pockets of risk and recovery
According to Khemka, the broader story on India Inc.’s earnings outlook hasn’t changed much despite the global noise. He expects low double-digit earnings growth—around 10–11%—for FY26, broadly in line with nominal GDP.
This is a base case he’s consistently held, pegged to structural factors. “If you look at corporate profits as a percentage of GDP, we are no longer at suppressed levels like 2018–2020. We’re back at the long-term average of just under 4%. So unless we overshoot meaningfully, it’s reasonable to assume earnings will grow at the pace of nominal GDP.”
That nominal growth, he estimates, should be around 10–11%, assuming 6% real growth and 4–5% inflation. The only exceptions to this norm, historically, have come during major dislocations like COVID.
He also pointed out that India’s earnings mix insulates it somewhat from global shocks. “If you look at the large components—banking, consumption—they’re largely domestically driven and not meaningfully impacted by global tariffs. Even IT, which could see some moderation, forms only 9–10% of the index. Commodities are about 3%.”
The moderation from these two sectors together, he said, may shave off half a percentage point from index-level earnings. “So it’s more towards 10% than 12%, but still in that low double-digit zone.”
No more downside left in consumption?
Among domestic sectors, consumption remains under pressure—but it may also be past its worst phase. “This is one of the deepest consumption slowdowns I can remember,” Khemka said. “The underperformance may have set the stage for either a return to trend growth or continued sluggishness—but not a nosedive. “From here, can it nosedive further? It’s always possible... but it’s hard to see how consumption can nosedive from where we are.”
He also pushed back on the idea that the recent drawdowns in small and mid-caps will have an adverse ‘wealth effect’ in India. “I don’t think the stock market wealth effect affects consumption materially. It’s not like the US, where a large share of household wealth is in equities. In India, equities are still under 5% of household assets,” he said. “The impact is biggest in Bombay, and India is not Bombay.”
Healthcare stable, but watch for tariff headlines
Healthcare, which has rallied over the past year, could see some impact depending on future announcements. “We are not sure whether he also knows what’s on his mind right now,” Khemka said of Trump. Still, healthcare’s long lead times and domestic orientation—especially in branded generics—could provide a cushion.
White Oak’s portfolio is more tilted towards domestic-facing healthcare firms, which benefit from pricing power via branded generics—unlike the intense competition in US generics.
Macro matters less than you think—markets stay on trajectory
Khemka warned against placing too much weight on short-term macro factors when forecasting equity returns. “The first newsletter I wrote in 2020 was called Macro Chakra, and the main point was: macro doesn’t help you predict markets. The market is always several steps ahead.”
Looking globally, he expects US m arkets to deliver mid to high single-digit dollar returns over time. “That’s the equivalent of 50–50 in coin flips. If you ask me to predict 10 coin flips, I will predict 5 heads, 5 tails. The actual result could be different... But that is still the best estimate of the next 10 coin flips.”
The big picture, then, is one of continuity. “The world remains pretty much intact in terms of how equity markets perform. US equities continue to be on an upward trajectory... India continues to be on an upward trajectory,” Khemka said. “Maybe instead of 3–4%, global GDP growth will be 2–3% for a year or two, and then limp back,” he said. “I’m not saying it will permanently be 2–3%—but limp back again to 3–4%.”
Global GDP, he added, isn’t seeing a collapse. “Even that drop (in growth) may be temporary. So the threshold for equity returns doesn’t change much.”
And if the tariff cycle reverses course, markets could surprise on the upside.
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