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Trying to retrofit reasons to why markets are going up – as they are now—is a mug’s game. Nothing has really changed in recent times, has it? Earnings have not provided the sort of surprises so far that made one sit up and press the buy button. Sure, the Gaza peace deal reduces uncertainty for now in the Middle-East, apart from ending the bloodshed, but that was not a market-moving event as such. Oil prices have been falling for some time now. Gold prices show no signs of the upward trend stopping.
But the one thing, with a caveat that it may be a false positive, is that the real, overall, effect of Trump’s punishing tariffs on the Indian economy does not appear to be all that severe.
Consider this analysis of trade deficit data for September in today’s edition by my colleague Manas Chakravarty. Merchandise exports grew by 6.7 percent in September, which is tepid “but then we must consider that from November 2024 to January 2025, when the tariffs hadn’t been dreamt of, India’s merchandise export growth was negative”. Exporters diverted shipments to other countries. Some of this could be a transhipment trade, but much of it is likely to be enterprising businessmen responding to the changed market situation. The trade deficit was higher, but put that down to a stronger domestic economy.
“In short, the initial alarm over Trump's tariffs appears overblown in the broader context of India's trade health. The resilience shown by exporters in finding new markets and the underlying strength in non-gold imports signal robust domestic economic activity,” writes Chakravarty.
Earlier this week, we had written about how Trump’s tariffs may have hit some labour-intensive sectors such as Textiles, but the overall impact on unemployment does not appear that severe. The IMF’s October edition World Economic Outlook also reflects some optimism with trade volumes expected to grow by 3.9 percent in 2025, higher by 1.9 percentage points compared to the April forecast. That’s a remarkable upgrade. Global GDP growth has been revised up 0.4 percentage points to 3.2 percent.
Of course, India’s trade data for September did reveal some weakness in services exports, with growth coming off earlier highs. Infosys’s results showed steady execution during the quarter, but they came along with a subdued guidance for the second half. Do read my colleague Madhuchanda Dey’s analysis of the software major’s results and why she has downgraded the stock. While Wipro’s results were decent and its commentary comforting, Dey has a nuanced take on the stock due to the divergence between its order wins and execution. Read her view on Wipro here.
While the software sector grapples with the uncertainty caused by growing AI adoption and Trump’s tariffs on its clients, one industry directly in Trump’s glare was steel. Recently-released steel demand data, which we wrote on earlier this week, points to a very limited impact on global steel demand, which is expected to be flat in 2025 (even that is a decent showing) and then rise in 2026.
Thus, the impact of Trump’s tariffs has been nuanced on the world economy and on the Indian economy as well. Markets could have picked up on the data cues that are showing there’s light at the end of the tariff tunnel. Of course, markets can be fickle. The article quoted above on IMF’s WEO also has four key warning signs on financial fragility –market valuations, government borrowing, non-bank financial institutions’ higher exposure and structural vulnerabilities.
A fifth is that Trump's tariffs have a back-ended effect on India's trade and economic growth.
If you think IMF’s concerns on financial fragility is fearmongering, here’s today’s FT selection (free to read for MC Pro subscribers) talking about ‘credit cockroaches’. Where’s there one, there’s usually more is how JP Morgan’s Jamie Dimon put it, after a bankruptcy-related write-down from its dealings with subprime auto lender Tricolor.
Investing insights from our research team
Infosys Q2 FY26 – Steady execution overshadowed by weak guidance
Wipro Q2 FY26: When will order inflows translate into growth?
Weekly Tactical Pick: Why this regional jeweller is set to glitter
Nestle Q2 FY26: Promising underlying growth amid GST-led disruption
What sets Canara Robeco AMC apart from other listed mutual fund houses?
What else are we reading?
Decoding India's Trade Deficit -- Strong domestic demand, not tariffs, is the real story
The new NPS rules add flexibility, but may also leave investors confused
Nuclear Power — From margins to mainstream in India’s energy mix
Navigating New Waters: The impact of port fees on global trade politics
Chart of the Day: Tea drinkers may rejoice, but growers and marketers may balk at price slide
Potential Emirates NBD-RBL deal reveals foreign banks' new India playbook
The PLI scheme’s success in manufacturing should be replicated in employment
Credit cockroaches (republished from the FT) Vault matters: Who's to be blamed for steep healthcare cost inflation?
The struggles of India's media & entertainment industry
Does the rise of non-bank funding represent financial disintermediation or liquidity shuffling?
Markets
Tech and Startups
RMG ban effect: WinZO forays into gold investments after microdramas ahead of Dhanteras
Technical Picks: ICICIBANK, RELIANCE, LAURUSLABS, HAL, BEL
Ravi Ananthanarayanan Moneycontrol Pro
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