New Delhi: Rollout of enormous, swinging tariffs under the administration of President Donald Trump will catch Indian equity markets under the storm more than any of its Asian counterparts, strategists at JP Morgan Private Bank and Morgan Stanley observe.
The recent tariff increases will affect India, but not as much as China and Vietnam, whose tariffs are significantly higher. Its exposure to the U.S. tariffs is relatively limited, with exports to the U.S. accounting for merely 2 percent of the country's GDP. This minor exposure combined with the GDP growth, which is to be slightly impacted wherein the figure has been estimated somewhere around 0.3 to 0.5 percentage points, makes India a more resilient country compared to the others in the region.
According to J.P. Morgan's Hong Kong-based Alex Wolf, headline tariff rate for an average Indian would likely be less than expected; thus, the argument that Indian markets are not so exposed becomes stronger. Moreover, equity markets in India are very much dependent on domestic conditions, which are expected to improve due to the already provided policies by the Reserve Bank of India. In February, the government slashed income taxes, and the central bank began a cycle of lending rate cuts to boost the economy.
Furthermore, analysts from Morgan Stanley spoke of the likelihood of India's growth story reviving buoyed by a congenial policy environment with limited tariff risks, rendering Indian stocks an increasingly attractive investment, though lately on the expensive side. The Nifty 50 has seen some losses but is better shaped than peers from countries like Vietnam and Hong Kong, where stocks are experiencing larger declines.
At present, analysts will believe that India has provided a balanced outlook for the economy along with low tariff exposure, which will mean a firm grounding for stock markets in the country, even amidst global trade uncertainties.
[Source Credit: Reuters]
