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

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

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

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

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

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

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

• Value 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 prone to preserve its power 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 development a stronger EBITDA development of 13% attributable to decrease uncooked materials prices & a PAT development of seven%.

The topline development was one of many slowest within the final 12 quarters largely attributable to a slowdown in B2C consumption depicted by sluggish mortgage ebook development down from peak of 20% to 10-12% presently, particularly in retail consumption.

The expansion for MIDCAP at EBIDTA & PAT degree being 18% & 16% was larger. We’ve got seen sturdy off shoots of development in Telecom, Cement, realty & Chemical sector.

In a bid to revive consumption, the federal government had already lower taxes within the latest price range of 3-5% for folks incomes lower than Rs. 25 Lakh. The PM has additionally introduced restructuring the GST from 4 slabs to a less complicated 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.

Curiously the federal government is amassing Compensation Cess which is budgeted at round Rs. ~1.7 Trn which may negate this loss in GST assortment. Therefore, this income discount of GST for the federal government might not enhance the fiscal deficit.

Indian Alternatives Forward

Traders might think about specializing in sectors and themes that provide structural development and are well-positioned to profit from present traits and at cheap valuations:

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

Indian Capital market gamers possible stand to realize from elevated liquidity and credit score development.

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 prone to profit from authorities spending which has elevated 7-fold in 11 years.

• Dwelling Bias manufacturing and Make in India themes: Prescription drugs and specialty chemical compounds proceed to supply long-term development potential pushed by home demand and export alternatives. The India and UK FTA therapy on textiles additionally presents us alternatives to give attention to firms which can enhance their exports attributable to this chance

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

Disclaimer: The knowledge and opinion expressed herein above don’t represent an funding recommendation to purchase, promote, maintain any securities, kindly seek the advice of applicable SEBI registered middleman earlier than making funding associated selections. The opinion expressed above are private views of the writer. The views of the writer may differ from the views expressed by another writer of ASK Asset and Wealth Administration.