Trideep Bhattacharya from Edelweiss AMC suggests that India’s relative competitive advantage is improving. This development is seen as beneficial for the “Make in India” initiative over time, with relevant sectors in the markets beginning to show optimism.
Initially, the outlook appeared negative; however, Bhattacharya highlights that India might be in a better position amid the global downturn. Although India has been an underperformer recently, the cooling down of the dollar index and oil prices, along with tariffs on China, may position India more favorably.
Bhattacharya points out two positive developments that markets are realizing post-initial reaction. Firstly, the tariffs introduced did not include additional negative impacts; in particular, the auto industry anticipated no new challenges, and the IT and pharma sectors avoided issues. Secondly, when comparing tariffs imposed on India against those on its Asian competitors, such as Bangladesh, Vietnam, and Cambodia, India’s tariff rate of 26% appears more advantageous, suggesting a better competitive edge.
These factors are seen as beneficial for India over the next three to four years. Bhattacharya identifies potential risks, including the possibility of higher inflation leading the US into recessionary conditions and whether other countries may react to US measures.
When discussing potential sectors for investment, Bhattacharya emphasizes the financial sector, largely benefitting from eased regulations and conditions within India, particularly affecting non-banking financial companies (NBFCs). These firms, facing minimal impact from tariffs due to their domestic focus, could see gains from improving project financing norms and possible rate cuts.
Additionally, sectors like power, owing to domestic themes, and real estate, especially building materials, are predicted to thrive. Bhattacharya expresses a preference for domestic earnings over those exposed to global factors given the current uncertainties.
Regarding consumption, Bhattacharya suggests that while overall there may be a cautious stance, consumption in the discretionary segment could improve by calendar year 2025. Initially, the first half might be weak, but the latter half could see enhanced spending due to tax benefits effectively increasing salaries by 5% to 7%.
In the IT sector, Bhattacharya indicates conservative expectations amid ongoing uncertainty and potential recession in the US. IT companies are expected to provide cautious guidance for fiscal year 2026, which might put short-term pressure on the sector. However, decision-making may improve in three to four months, potentially offering opportunities.
Finally, Bhattacharya comments on the broader market, affected by significant macro uncertainties, including India’s elections and economic stagnation along with Trump’s measures. He expects this uncertainty to gradually recede, with earnings potentially recovering in the latter half of fiscal year 2026. Until then, markets may undergo a period of correction, with better prospects expected to materialize subsequently.
