The latest imposition of a 26 p.c tariff by US President Donald Trump on Indian imports has triggered market volatility and sparked considerations about the way forward for India’s commerce dynamics.
Nonetheless, in accordance with a report launched by world brokerage agency Jefferies on Thursday, these tariffs are anticipated to have a restricted influence on main Indian export sectors equivalent to IT companies, prescription drugs, and the auto trade. The report emphasizes that there is no such thing as a rapid risk to those key industries.
Though the 26 p.c tariff seems vital, it’s comparatively decrease than the levies imposed on a number of different rising markets. The report notes {that a} larger concern lies within the broader slowdown of the US economic system, which might not directly weigh on Indian exports.
Jefferies highlighted that the Indian sectors most reliant on US commerce—specifically IT companies, pharma, and autos—are comparatively insulated from the present tariff transfer. As an alternative, the first threat stems from a weakening US financial outlook, which might scale back demand and negatively have an effect on Indian exporters in the long term.
Right here’s a more in-depth have a look at how key Indian industries and associated shares could also be affected by these developments:
1. IT Providers Sector
In line with Jefferies, India’s IT companies trade is unlikely to be immediately impacted by the newly imposed US tariffs. Nonetheless, the brokerage cautioned {that a} slowdown within the US economic system—significantly in GDP development—might result in diminished demand from sure segments, notably manufacturing, logistics, and retail.
Alternatively, sectors equivalent to healthcare, high-tech, utilities, and communications are anticipated to stay comparatively secure. Among the many corporations anticipated to fare higher on this setting are Tech Mahindra and HCLTech, whereas mid-sized companies like IKS Well being and Sagility might additionally see beneficial efficiency.
2. Prescription drugs Sector
The pharmaceutical trade seems to have been largely unaffected by the brand new tariff measures, offering aid to Indian drug exporters. Jefferies highlighted that this exemption might doubtless set off a rally in generic pharma shares with vital publicity to the US market.
As per the report, pharma shares like Lupin, Dr. Reddy’s Laboratories, and Zydus Lifesciences could expertise upward momentum.Earlier this week, US President Donald Trump exempted pharmaceutical merchandise from reciprocal tariffs within the sector.
Beforehand, the US President had hinted at potential levies on prescription drugs, semiconductors, and different sectors. Nonetheless, whereas he imposed a 25 p.c tariff on car imports and associated elements, the pharmaceutical sector was spared. At current, India imposes a ten p.c tariff on pharmaceutical imports from the US, whereas the US doesn’t levy any tariff on Indian pharmaceutical merchandise.
3. Car and Auto Parts Sector
Jefferies famous that Indian exports within the car and auto elements phase have been already impacted by a 25 p.c tariff launched in March, and subsequently, the most recent tariff developments don’t introduce extra pressure. Nonetheless, the brokerage emphasised that corporations with substantial income dependence on the US market are more likely to proceed dealing with stress.
Key gamers affected embody Tata Motors, whose Jaguar Land Rover division derives ~30–35 p.c of its gross sales from the US; Eicher Motors, with round 10 p.c publicity; Sona BLW Precision Forgings, which generates about 40–45 p.c of its income from the US; and Bharat Forge, with 35–40 p.c reliance. Samvardhana Motherson is seen as much less weak as a consequence of its world manufacturing footprint, which helps mitigate tariff-related dangers.
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4. Chemical substances Sector
Within the chemical substances house, Jefferies flagged considerations over the newly imposed 27 p.c tariff, particularly for Indian specialty chemical companies with vital publicity within the US Whereas the sector’s long-term development prospects stay intact, the brokerage warned that short-term earnings could possibly be negatively impacted.
Firms recognized as extra uncovered to those dangers embody Navin Fluorine, with roughly 25 p.c of income coming from the US; PI Industries, with 20 p.c publicity; SRF, at 7 p.c; and UPL, which derives between 11 p.c and 13 p.c of its revenues from the US market.
5. Textile Sector
Indian textile exporters are among the many worst hit and are more likely to face vital challenges beneath the newly imposed tariffs, in accordance with Jefferies, because the US is a key marketplace for dwelling textiles and attire.
Firms with a excessive dependence on US revenues could discover it more and more troublesome to stay aggressive, particularly when in comparison with rival nations like Vietnam and Bangladesh. Among the many shares most in danger are Welspun Residing, Trident, Himatsingka Seide, Indo Rely Industries, Vardhman Textiles, Arvind, and KPR Mills.
6. Photo voltaic & Electronics Manufacturing Sector
The photo voltaic trade is anticipated to bear the brunt of the tariff hike, because the 27 p.c levy comes on prime of current import duties, considerably rising the fee burden for Indian exporters. Jefferies famous that that is anticipated to significantly influence corporations like Waaree, which has ~54 p.c of its order guide linked to the US market.
Electronics producers are additionally affected, although to a lesser extent, given their comparatively decrease publicity to the US corporations like Kaynes (with 2–3 p.c US publicity), Syrma (round 4 p.c), and Dixon (practically 5 p.c) should really feel some stress.
Outlook
Jefferies anticipates that India could pursue a commerce settlement aimed toward lowering tariffs, probably by late 2025. Nonetheless, the brokerage additionally warned {that a} extended world financial slowdown might proceed to pose vital dangers throughout a number of sectors.
Written by Shivani Singh
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