The headline number may look daunting, but the reality is more nuanced. Not every sector faces equal risk. Two of India’s strongest export segments—pharmaceuticals and electronics—are exempt from the tariffs, softening the overall blow and averting a broader disruption to the economy.
That said, export-heavy businesses will feel the strain. With just a 21-day window before the tariffs take effect, companies and policymakers have limited time to recalibrate strategies or push for relief.
That said, India is no stranger to external shocks. Over the past decade, the economy has weathered supply chain breakdowns, volatile energy prices, and shifting geopolitical dynamics. The strength and diversity of the domestic market provide some cushion, though export-focused sectors are still likely to feel the strain in the near term.
Tariff shocks often spill into currency markets, and the rupee is already under pressure. A weaker rupee raises import costs but also boosts exporters’ margins. Businesses with a diversified export base beyond the US stand to gain the most.
The IT sector is a case in point. After a few uneven years, valuations have returned closer to long-term averages. Coupled with steady dividend payouts and potential currency gains, IT merits investor attention. Yet caution is necessary. The industry faces shifting client spending patterns and the disruptive potential of AI on legacy service models. Investors must weigh attractive valuations against structural transformation risks.History shows that external stress often spurs reform in India. The current tariff episode could accelerate government measures to strengthen domestic industry, streamline regulations, and deepen integration into global supply chains. Initiatives such as production-linked incentive (PLI) schemes, infrastructure upgrades, and compliance simplification may gather greater urgency. Companies aligned with these policy priorities are likely to benefit.Perhaps the clearest lesson is the importance of geographical diversification. Over-reliance on a single market leaves investors vulnerable to abrupt policy shifts. While Indian portfolios have traditionally been domestically focused, rising globalisation and unpredictable trade disputes demand a broader approach.
International diversification expands opportunity sets by offering exposure to global technology leaders, healthcare innovators, and financial institutions not accessible locally. It also provides a hedge against currency fluctuations and helps stabilise portfolio performance across different economic cycles.
So, how should investors approach the current situation?
Avoid knee-jerk reactions to tariff headlines; sell-offs often overshoot fundamentals and create opportunities for patient capital.
– Prioritise company-specific analysis over sector-wide calls. Firms with pricing power, diversified markets, and adaptable operations tend to outperform in volatile environments.
– Make international diversification a priority. Despite regulatory constraints, diligent investors still have multiple avenues for global exposure.
Trade winds will always shift. But investors anchored in diversification, adaptability, and long-term conviction won’t just endure tariff storms—they’ll learn to navigate them profitably.
(Arihant Bardia, CIO and Founder, Valtrust)