How does an investor—or how do our viewers—navigate the uncertainty that comes with the recent developments? We are now seeing an additional tariff overhang of 250% on pharma, and there are also threats of broader tariffs on India as a whole. How should our viewers deal with these uncertainties in the current market?
Sunil Subramaniam: First, as a viewer, you need to assess your own risk profile. What is your ability to handle volatility, which is inevitable in these times—thanks to Mr. Trump’s tweets and the general uncertainty?
If you are a risk-taking investor, you might view this situation differently. Let’s say we face a higher oil-related tariff that goes from 25% to 30%, and pharma tariffs rise significantly over time. The key point here is that much of this negative sentiment is already priced into the market. I’m not saying the correction is entirely over—there may be more to come—but a large part of the correction has been driven by FIIs staying away from Indian markets.
Foreign investors have been avoiding export-oriented sectors due to the uncertainty around tariffs. As a result, sectors like pharma and IT have already seen price corrections. So, if you’re a risk taker, you can argue that India is not without tools to respond to tariffs. For example:
Currency depreciation can help offset some tariff impacts.
The government may offer productivity-linked incentives to enhance competitiveness.India can explore alternative export markets like the EU and other Asian countries.So, yes, a lot of the bad news is already in the price. But if your risk appetite is not aggressive, it’s better to avoid external-oriented sectors.
You should “Trump-proof” your portfolio by focusing on domestic sectors, which are less impacted by these global tensions. Domestic mutual funds have bought ₹2 lakh crore worth of equities in the last three months—about ₹60,000 to ₹65,000 crore per month. Much of what FIIs sold, domestic funds picked up. When FIIs sell, they often sell across the board, including both domestic and export-oriented stocks, as part of index-based selling. But domestic investors have focused on local sectors, which is why those haven’t fallen as much.
This creates a degree of built-in safety. And I don’t expect domestic fund managers to take big bets on external-oriented sectors just yet. They too are likely to prefer domestic stories. Additionally, the ongoing earnings season will be a key trigger for them.
If you are a moderate-risk investor, I would suggest sticking to domestic-oriented sectors such as consumption, banking and financial services, and capital goods (for slightly longer-term investors).
At this stage, I’d recommend going through mutual funds rather than picking individual stocks. Domestic funds have already bought the good stocks, and those prices have gone up. It’s difficult for a retail investor to identify undervalued stocks within the domestic space right now, especially with earnings season still underway.
So, multicap and multi-asset funds could be a good approach. Also, keep in mind the potential for a Fed rate cut. The NFP data in the U.S., combined with President Trump’s pressure to appoint loyalists to the Fed, increases the odds of a rate cut. That could be a tailwind for emerging market equities, possibly bringing some FII flows back to India.
The key is to take a balanced approach. Avoid tariff-impacted sectors unless you have a high risk appetite.
If you look at the RBI’s policy today, macro indicators like growth and inflation seem positive. Despite the tariff threats, the RBI hasn’t revised India’s growth forecast—it’s still at 6.5% for the current year. They have access to comprehensive data, so that’s reassuring.
Also, remember that exports are just 2% of India’s GDP. Our economy is relatively insulated compared to many global peers. So, it’s better to align with the domestic economy’s strength and RBI’s stable policy. In fact, the RBI’s decision to pause rate cuts suggests confidence in the economy—it doesn’t feel the need for additional stimulus. That’s a good sign.
So, stay confident in the domestic story and align your portfolio accordingly, especially if you are a moderate-risk investor.
What’s your overall view on the paint sector? We’ve seen Asian Paints moving higher recently. Today we also spoke to Berger Paints’ management, and they seem quite optimistic about the demand outlook. With increasing competition, do you still favour the traditional players?
Sunil Subramaniam: I believe the correction in paint stocks was a bit overdone. These are all fundamentally strong companies. Yes, monsoon season tends to slow down construction activity, which may impact painting demand temporarily, especially in residential housing. So, we could see a soft quarter.
However, as private capex picks up, industrial paint demand will grow. So, I think now is a good time to enter paint stocks. As you mentioned, we’re already seeing signs of a recovery.
Even though the lack of a rate cut may have temporarily affected rate-sensitive sectors like real estate, I still maintain a positive outlook. Paints fall under both building materials and premium retail categories—they straddle multiple sectors, making them more resilient.
Also, paint companies are largely domestically oriented. A major positive for their margins is the softening of crude oil prices, as crude derivatives are key raw materials in paint manufacturing. That provides another tailwind for earnings growth.
