Speaking to ET Now, market expert Anand Tandon said tariff protection is playing a crucial role in the current momentum for Indian metal stocks.
“Well, metal and like most other things which are affected by China are now well protected because of tariffs. So long as the tariff protection remains, Indian companies can earn higher than they should be earning and therefore, they will be making profits probably on account of the fact that the end users are getting penalised for the pricing at which the domestic suppliers are supplying it. If you were to actually reduce the tariff and have a free market, obviously that is not going to happen. But with that kind of protection, there is more than enough money that is made in the domestic market. Therefore, companies which are largely focused on the domestic market are likely to do well on the metals and for change they are not overly expensive though it is not that they are cheap but optically at least it will look like that the PEs are not over the top,” he explained.
Tourism and Airlines in Focus
The discussion also turned to the travel and tourism sector, which has been in the spotlight thanks to the ongoing GST rationalisation. Stocks like TBO Tek have gained attention following acquisitions, while expectations are building around potential tax relief for hotels and airlines.
Sharing his outlook, Tandon noted that the sector has already enjoyed strong momentum over the past year and a half, especially in hospitality.
“So, this is a sector which has done well over the last 12 to 18 months and perhaps a little longer than that, especially the hotel sector. Capacity has also been going up, but clearly the prices have moved up and therefore, the profitability for the whole sector has moved up as well. In the airline space, it has also been helped by the fact that there has been a significant constraint in terms of supply both because the number of airline players has come down as well as the ability to add new planes has come down because of the incompetence of Boeing in terms of being able to supply aircrafts. So, net-net it is a supply constrained situation as far as airlines go and as I said the hotel capacity is doing reasonably well and the prices have gone up,” he said.
On whether GST changes would provide an immediate boost, he added: “Now, will the GST help in the immediate term if they pass on some of the benefits? Certainly, especially the higher-end hotels because the GST there hits quite hard.”
Tariffs Cast a Shadow
However, Tandon struck a cautious note on the broader market outlook, pointing to the persistence of tariffs and their potential impact on growth.
“The issue, however, at hand is whether or not the overall economic situation does it weaken significantly from here on account of the tariffs. We can keep on talking about tariffs having a temporary problem. The reality is that first no change is likely before the mid-term elections in the US and after that if the Republican party does well, I would posit that it is possible that the Trump administration will not be in any hurry to make major concessions on Indian tariffs.
“So, we have to assume that the tariffs are here for a while. Now, in that kind of scenario you should expect to see a fast decelerating impact on the overall economic growth within the country and that half a percent that everybody is forecasting is in my mind a gross underestimate. So, going forward I am actually reasonably bearish on the market in general and in consumption in particular,” he cautioned.
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