What’s your reading of the market construct? We’ve been stuck in this range for quite some time, and there’s still a question mark over what will happen with the tariff deal. Now, with Japan signing an agreement with the US, there’s a bit more hope that perhaps our turn could come soon. Also, the earnings season has delivered both major positive surprises and some big disappointments.
Prateek Agrawal: A few thoughts. Many of the larger companies that have reported results so far may have been slightly on the softer side, yet the markets are holding up, and these companies’ stocks are also holding up quite well. That, to me, indicates market strength. On the other hand, companies that have done well and beaten expectations have seen strong responses from the market, which again reflects the same underlying strength.
And this is happening despite a very tough IPO and QIP market, which is draining a lot of liquidity from the system. So overall, I would say the market construct looks very solid.
Secondly, on the trade deal, we’ve already taken some steps — we’ve opened a few cards with our trade agreements with the UK, and now we’re working on one with the EU. What we’re offering is gradually coming into the public domain. Similarly, other countries are also making deals — Japan has signed something, Indonesia has too — and that gives us a sense of what’s possible.
What strengthens India’s position in negotiations is the sheer size of the Indian market. Today, it may be slightly smaller than Japan’s, but in the future, it will be the second-largest market in the world. So, when we open up our market, we’re offering something very significant. As we see how different countries are positioning themselves, the realm of possibilities starts narrowing, and if it narrows the way I expect, it could be very positive for ‘Make in India’.
Competing countries might offer concessions closer to 30%, while we may only offer something in the range of 10–15%. So, fingers crossed. Let’s hope it happens. We’ve seen instances where we came very close to a deal, and it didn’t materialize. So, all outcomes are still on the table, but today, I am optimistic. A good deal could make our manufacturing more competitive in the world’s largest current market — and for the US, it opens a gate into what will soon be the second-largest market in the world.
Which sectors do you believe stand to gain most from a US-India trade deal? When these reciprocal tariffs were first announced, many export-focused sectors and stocks took a beating. Where do you think India can truly make a mark?
Prateek Agrawal: There’s a short-term view and a long-term one. If you look at the cost and availability of labour, over time, Indian manufacturing should have a distinct advantage. The US is one country that could lift us up too, but of course, our people need to be capable and ready to seize the opportunity — it works both ways.
In the immediate term, think about it: the US wants to do more high-end work — things that align with their “Make America Great Again” vision — but most of that won’t be labour-intensive. They don’t have enough labour. So, for labour-intensive production, they’ll want to source from other countries. India, being the most populous nation in the world, should benefit here.
We’ll need to tweak laws and make things happen, but the opportunity is massive. The not-so-great part is that very little of this is currently represented in the Indian market. For example, how much textile can you buy? It’s a tiny space. Leather goods? Same story. The entire Apple ecosystem, for instance, is outside the listed market.
Yes, over time, EMS players might gain access to the US market, but today they’re more focused on import substitution domestically. So, while the long-term outlook is promising, in the near term, not much will change for the stock market.
The last time a similar narrative emerged — around January–February — we believe the real issue was currency and interest rate volatility. US yields were tight, and the rupee depreciated nearly 5% in about 10 days. That spooked foreign investors, who are extremely sensitive to dollar returns, and they pulled money out.
But now, as things have stabilized, they’re back. We’ve had four months of inflows. This month might be negative, but before that, it was positive. So, in the short term, we suggest watching currency markets and bond yields. The trade deal’s impact may be limited in the immediate term — but over time, yes, it could be significant.