How do you see the US tariffs of 50% on Indian exports impacting the markets?
If you notice, the index has not really declined that much. Of course, India is now underperforming China, but still, the Indian market looks healthy. So, I think the market is taking it in stride. Now, it is true that the US is India’s biggest export market, but at the end of the day, not all products will be hit. Sectors like pharmaceuticals will be hit badly. Diamonds and gems will be hit, and apparel will be hit. But there are different ways around these. Many of these manufacturers in India are now going to other countries to manufacture in places like Africa and other places where the tariff into the US is not high. So, the Indian entrepreneurs are very creative. I think they will be able to get around some of these problems. Definitely, it is a hit to these exporters. But at the end of the day, the Indian market is so enormous. The domestic market is growing at a tremendous pace. Economic growth is still doing very, very well.
Foreign investors have been cautious about India for a year now. Is there a shift to China?China has now come back and is outperforming over the last year. But at the end of the day, you can’t beat India’s growth, which is much higher than China’s, and you can’t beat the entrepreneurs in India. So, we are definitely not giving up on India. By a long shot, India is still going to be a very good market, and the investors will be back.
When will foreign investors re-look at India?
In about 3-4 months from now. By then, some of these trade disputes will be resolved.Another very important factor here is that the Indian government is taking measures to reduce bureaucracy, paperwork, and restrictions on domestic manufacturers and consumption. The efforts by PM Narendra Modi to reduce or eliminate a lot of this bureaucracy are now going to start paying off, because the Indian government realises that they have got to do something to help these manufacturers.This is going to have a big long-term impact, because the extent to which manufacturers can escape a lot of the bureaucracy is going to be a big money saver.US bond yields are rising. What does this signal about the Fed’s next move?Well, the Fed is definitely moving towards a lower rate, and we’ve already noticed that banks are lowering their US dollar interest rate offerings. Earlier, we were seeing something like 4.4% or 4.3%, but now the rates on US dollar deposits are coming down.This means investors, who had been holding a lot of cash to earn those high interest rates, will have to look elsewhere for returns, and that points to equities. That’s one of the reasons US equities are doing so well. And if US equities are strong, it also creates good opportunities for emerging markets, because American investors will want to diversify once they see their US holdings rising.
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