The future of the US-India trade deal is still unclear, since recent US moves have increased uncertainty over tariff policy and trade schedules. Indian equities markets are unlikely to see a major or rapid reaction to trade-related developments, according to market analysts and fund managers, even if the lack of clarity will persist in the near future.
The US Supreme Court’s decision on Friday to postpone a decision over the validity of the extensive tariff system implemented under the administration of former President Donald Trump has added to the uncertainty. Questions over whether current tariffs would stay in effect or be reduced in response to continuing legal challenges have been extended by this delay. In addition, measures for severe punitive tariffs—reportedly as high as 500%—have been discussed in the US legislative framework. If these provisions are put into effect, Indian exporters may face significant difficulties.
Diminished Expectations for the Timeline of Trade Deals
Expectations of a near-term trade agreement between the United States and India have diminished, according to fund managers monitoring both local and international markets. Prashant Khemka of WhiteOak Capital said at the CFA Society India Investment Conference that there has been less hope in recent months for a quick deal. Although he had previously anticipated progress based on diplomatic signals and policy discussion, he now thinks that even reaching a settlement during the current year would be beneficial.
Additionally, Khemka emphasized the current legal ambiguity in the US by pointing out that the Supreme Court is wary of executive overreach in tariff rulings. In light of larger macroeconomic factors including global liquidity circumstances and growth prospects, he continued, markets should not immediately predict a significant positive response, even though certain tariffs may eventually be contested or modified. He did concede, though, that some industries—textiles in particular—are clearly under strain and would profit from increased trade clarity.
Minimal Market Sensitivity to Changes in Tariffs
Indian equities markets have not yet demonstrated any attention to developments pertaining to tariffs. The fact that trade talks and tariff announcements have not significantly changed the course of the market, according to fund managers, suggests that investors are taking these risks into account without going overboard.
Vikas Khemani of Carenlian Capital emphasized that company-specific fundamentals should take precedence over sector-wide narratives when making investment decisions. He asserts that there are certain businesses with solid balance sheets and promising development prospects even in industries that are suffering difficulties. He said that the macroeconomic effects of trade disputes are still minimal, pointing out that India increases by a comparable amount in only one quarter while US exports make up less than 2% of the country’s GDP.
Changes in Structure Outside of Tariffs
Experts saw a more significant shift in the world economy that went beyond the current trade issues. According to Chirag Setalvad of HDFC AMC, the present climate shows a move away from conventional globalization, with nations placing a greater emphasis on their own interests. Even if tariff-related problems are settled, he continued, other geopolitical or economic difficulties are likely to surface, putting markets on edge.
Setalvad warned that the elimination of tariffs would not automatically bring about world peace, pointing out that investor attention frequently shifts rapidly from one issue to another. This emphasizes the necessity of a long-term, well-rounded investing strategy.
Put Long-Term Fundamentals First
Sharp market corrections usually only happen when there is widespread economic suffering or bankruptcy danger, Khemka found. He cautioned investors not to respond rashly to trade related news in the absence of such circumstances. Instead, he promoted long-term, methodical investing, seeing volatile times as possibilities rather than dangers.
Overall, market analysts think that Indian stocks are well-positioned to absorb these changes, given investors remain focused on fundamentals and long-term growth prospects, even though the timeframe for the India-US trade deal is still unknown and tariff-related uncertainties continue.
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