India Playbook 2025: Proposed tariff imposition from US punishes Indian market regardless of resilient economic system

Regardless of World fairness markets cheering to talks between US & Russia & transferring up 3% within the final month(Mid Jul-Mid Aug), Indian markets have underperformed the world with massive cap being flat & Mid & Small cap falling 3% & 5% respectively. FIIs too who had put in nearly $4bn (Apr-Jun) grew to become internet sellers within the month of Jul-Mid Aug.

The important thing danger traders have perceived about India has been 2: 1) The proposed tariff imposition of fifty% from US as a consequence of India’s nexus with Russia. 2) The quarterly outcomes of Q1F26 depicted a topline progress of 6-7% for the broader index, one of many slowest topline growths within the final 12 quarters.

This implies a doable continued slowdown in B2C consumption as depicted by the nation’s mortgage e-book progress of 10-11% down from a peak of 18-20%. The Indian Authorities has introduced radical adjustments within the GST after 8 years which ought to result in decrease costs for mass items for shoppers & propel consumption.

The Indian markets have had a time correction over a 12 months with the Giant cap being nearly flat & Mid & Small cap being 4-5% decrease over a 12 months. We consider there’s a case for going lengthy on India as a result of resilient Indian economic system & themes we like on a bottom-up foundation embrace Finsumption (Monetary + Consumption), Capex & Make in India.

ETMarkets.com

The India-Russia nexus helps Foreign exchange reserves & retaining India’s import invoice low

India now sources practically 38% of its crude oil imports from Russia—up from simply 2% earlier than the Ukraine battle. This shift affords two main financial advantages:

• Price Effectivity: Russian Urals crude trades at a ten–15% low cost to Brent, regardless of comparable high quality. Indian refiners save roughly $7–10 per barrel, translating to annual financial savings of $4.5–7 billion. These financial savings bolster refining margins and offset losses in LPG distribution.

• Foreign exchange Preservation: Russia settles a good portion of its oil commerce with India in INR or different non-dollar currencies. This might quantity to $40–45 billion yearly, serving to preserve India’s international trade reserves.

Given these benefits, India is more likely to keep its vitality partnership with Russia regardless of exterior pressures.

F1Q26 Outcomes – Tepid topline & bottom-line

Our evaluation suggests outcomes of the broader index in Q1F26 has led to a 6% high line progress a stronger EBITDA progress of 13% as a consequence of decrease uncooked materials prices & a PAT progress of seven%.

The topline progress was one of many slowest within the final 12 quarters largely as a consequence of a slowdown in B2C consumption depicted by sluggish mortgage e-book progress down from peak of 20% to 10-12% at the moment, particularly in retail consumption.

The expansion for MIDCAP at EBIDTA & PAT degree being 18% & 16% was increased. Now we have seen sturdy off shoots of progress in Telecom, Cement, realty & Chemical sector.

In a bid to revive consumption, the federal government had already minimize taxes within the latest finances of 3-5% for individuals incomes lower than Rs. 25 Lakh. The PM has additionally introduced restructuring the GST from 4 slabs to an easier 2 slab construction together with the next tax for Sin items like SUVs, Cigarettes, Aerated drinks, Tobacco and so on.

Particulars of the identical are anticipated shortly however our estimates counsel Rs. 1.5-2 trn discount in GST or 0.4-0.5% of GDP. This might revive the a lot wanted thrust in retail consumption.

Apparently the federal government is gathering Compensation Cess which is budgeted at round Rs. ~1.7 Trn which might negate this loss in GST assortment. Therefore, this income discount of GST for the federal government could not improve the fiscal deficit.

Indian Alternatives Forward

Buyers could contemplate specializing in sectors and themes that provide structural progress and are well-positioned to learn from present developments and at affordable valuations:

• Finsumption: The housing finance sector is more likely to achieve from elevated budgetary allocations and a falling rate of interest surroundings.

Indian Capital market gamers seemingly stand to achieve from elevated liquidity and credit score progress.

The Consumption story of India has slowed down and right here we’d guess on bottom-up concepts.

• Capex-linked sectors: Capital items (Infrastructure – Cement, Ports, Pipes, Tubes, Energy) are more likely to profit from authorities spending which has elevated 7-fold in 11 years.

• House Bias manufacturing and Make in India themes: Prescription drugs and specialty chemical substances proceed to supply long-term progress potential pushed by home demand and export alternatives. The India and UK FTA therapy on textiles additionally presents us alternatives to concentrate on corporations which can improve their exports as a consequence of this chance

(The creator is CIO and Head – Fairness Advisory, ASK Personal Wealth)

Disclaimer: The data and opinion expressed herein above don’t represent an funding recommendation to purchase, promote, maintain any securities, kindly seek the advice of acceptable SEBI registered middleman earlier than making funding associated selections. The opinion expressed above are private views of the creator. The views of the creator can also differ from the views expressed by every other creator of ASK Asset and Wealth Administration.