Dear Reader,
We can’t avoid, much as we’d like to, starting off this newsletter without a mention of Donald Trump. His use of tariffs as political weapons—netting a $50 billion haul so far—has rattled nerves from Brussels to Beijing. And guess what? It’s not him, but the world that’s chickening out, as this FT story tells us. That echoes the point we made when we wondered whether the market menu has shifted from TACO (Trump Always Chickens Out) to TART (Trump Always Raises Tariffs). His strategy echoes in Asia, where Japan finds itself at an inflection point: caught between a changed US and its own economic inertia. Meanwhile, India and China are tentatively trying to find common ground, less out of affection than mutual recognition of strategic realism.
That realism is also being priced into Indian equities, in sectors and companies that are both beneficiaries and victims of shifting global sands.
Consider Bharat Electronics—long a symbol of India’s defence self-reliance—whose consistent execution and pipeline strength suggest that geopolitical tension can be good for business. In contrast, Hindustan Aeronautics, despite a fatter order book, struggles with cash conversion. It’s not just the scale but also the efficiency that counts.
Elsewhere, as global attention turns to de-risking from China, India’s position in global pharma outsourcing is becoming more entrenched. The enthusiasm shows up in the Anthem Biosciences IPO—a pricey but promising bet on the CRDMO wave.
What about the other outsourcing opportunity—IT stocks? Well, there are companies like Tech Mahindra, trying to get re-rated with a turnaround plan. It may yet work—the quarter wasn't spectacular, but the messaging is cleaner, and the market is beginning to listen. Wipro, a disappointment for long, offered a mild surprise on the upside. HCL Tech, meanwhile, calls for investor belief in what it thinks will be short-term pain, long-term gain.
Note, though, the fragile external trade position. Merchandise trade momentum slowed sharply in June, suggesting that while India may benefit from strategic shifts, it isn’t immune to the downside.
What about the domestic economy? There could be signs of strain there too, with urban unemployment rising even as more people drop out of the workforce altogether. That could signal weaker demand, and there are many instances of that, such as in automobiles, real estate, FMCG. Even GM Breweries is under margin pressure—not just due to input costs but because discretionary consumption in lower-income segments is clearly fragile. If even country liquor makers, who one would have thought would do well both in good and bad times, are suffering, things must be bad indeed.
Inflation, for the moment, is cooperating. A June plunge in CPI has re-opened the rate-cut conversation ahead of the August MPC meeting. But the RBI is keeping its cards close to its chest. Fertiliser prices, for instance, are climbing again—posing risks to both fiscal arithmetic and rural sentiment. Low food prices may also affect rural demand, and the low inflation could also be a warning sign.
Dampened demand, along with intense competition, cast a shadow on the likes of D-Mart, which disappointed this quarter, missing earnings expectations. The stock, always priced for perfection, is now being asked harder questions about whether consumption can keep pace with valuation. Sirca Paints is similarly being reassessed: in a low-inflation environment, premium paints ought to do well—but has the market painted too rosy a picture?
The weakness in economic growth is seen in credit offtake, where non-food credit growth has slumped to 9.3 percent from a year ago. That is reflected in the quarterly results of Axis Bank, about which we wrote here and here. Among other financials, ICICI Lombard showed signs of a slowdown across segments, with retail health being the lone outperformer. HDB Financial had a soft Q1 too, but the structure remains robust—leverage, product mix, and access to capital are all in place.
The fragility is evident even in Tata Technologies, where the aerospace vertical is gaining height, but auto is idling. In a world where EVs are the future and Tesla is now officially knocking on India’s doors, the transition is inevitable but uneven.
At the other end of the optimism spectrum is Ixigo—a tech company thriving on rising travel demand, agile operations, and an asset-light model. Ixigo keeps its footprint light and delivery sharp, prompting analysts to call it a “core portfolio” candidate.
If all this sounds like a market wrestling with contradictions, that’s because it is. Take VIP Industries—a consumer brand in flux. A change in control has sparked an open offer, and minority shareholders are caught between the safety of exits and the hope of reinvention. In many ways, this captures the mood across the board.
Even Indian Hotels, enjoying strong growth momentum, is being looked at more cautiously—can the premium segment sustain its run? Can ITC Hotels, after its steep climb, still reward those who arrive late to the party?
In short, the market is telling different stories—some bold, some hesitant, and many still being written between the lines of earnings and expectations. It rides on hope---don’t forget loose monetary policy--- but fear is never very far away. It’s no wonder some are turning to commodities. Silver remains bullish, because bullion thrives in difficult times.
And finally, a nod to Tim Harford’s ode to Jimi Hendrix’s Wah Wah pedal, which didn’t just rock Jimi’s world—it rewrote music’s rulebook. So, for this week’s listening pleasure, fire up Voodoo Child (Slight Return), let Jimi’s riffs drown out the market chatter, and keep in mind: amid protectionist policies, international trade disputes, and challenging asset pricing, occasionally you just need to crank up the music and step on that wah-wah pedal.
Cheers,
Manas Chakravarty
In case you missed them, here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:
Stocks
Weekly tactical pick – this housing finance company offers valuation comfort, LTTS Q1 FY26: What to expect from the stock after muted quarterly numbers? Why this power T&D player could be a re-rating candidate, 360 ONE Wealth delivers a healthy Q1, what holds next?
Markets
Why has the Jane Street issue unnerved traders?
Samir Arora’s flagship fund pounces on these four stocks in June — Here’s why analysts think they’re smart bets
Fund Manager Survey: Sentiment turns most bullish since 2024; India slips to fourth rank in Asia, according to BoFA
Financial Times
How investors should view threats to the Fed
How BYD caught up with Tesla in the global EV race
Can finance put a stop to AI data mining
Companies & Sectors
Revolution on wheels-Tesla's arrival in India
Used car sales surge, will profitability follow?
Q1 show of top two life insurers gives investors hope for better FY26
For Q1, past will outshine present as life insurers brace for soft FY26
Economy & Policy
Rate cut vs market reality: Understanding the nuances in RBI’s policy communication
How food inflation has influenced headline CPI so far this year
To be Viksit Bharat, India must mend its teacher recruitment, quality
Will SEZ reforms in the monsoon session reignite India’s factory ambitions?
Tech & Startups
New deepfake laws are unlikely to stop the menace
Startup Street: Startups capitalise on a growing need for immersive experiences
How AI startup Hypergro is disrupting advertising industry using Gen AI videos
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