Trump’s policies drive bets on domestically driven Indian stocks – News Air Insight

US President Donald Trump’s plan to slap a $100,000 fee on H-1B visas is just one more reason to look for outperformance from India’s domestically exposed stocks, which are less vulnerable to the America First agenda.

The H-1B levy, which affects a program heavily used by software giants like Mumbai-based Tata Consultancy Services Ltd. and Bangalore-based Infosys Ltd., risks deepening margin pressures in an industry already grappling with tighter client budgets, disruption from artificial intelligence and unease from trade policy uncertainty.

Allspring Global Investments is reducing an underweight equities position on India by adding exposure to domestically driven sectors such as consumer and financials, which are supported by favourable macro data and policy tailwinds, said the firm’s portfolio manager Gary Tan. “The proposed H-1B fee hike compounds the challenges facing India’s export-led growth strategy.”

For investors, the set of headwinds confronting global-facing firms reinforces the case for rotating into banks, consumer companies and infrastructure plays tied to resilient local demand. As policy shocks from Washington make the prospects for India’s big IT firms murkier, the government is cutting goods and services taxes to boost consumption, which is likely to benefit domestically focused companies.

The market is already voting that way: the Nifty IT index is down about 19% year-to-date, while domestically focused NSE sector gauges — banks, autos, consumer — are up roughly 8% to 19%, according to data compiled by Bloomberg. “The Indian government’s policy pivot to boost consumption via tax cuts and GST rationalization offers near-term demand impulse and augurs well for domestic demand-driven sectors,” said Nitin Chanduka, a strategist at Bloomberg Intelligence.Indian equities still remain the most expensive major stock market in Asia even after this year’s pullback.

Potential escalation in US trade or immigration measures may test investor confidence and the resilience of domestic demand.

However, local equities’ underperformance versus their emerging-market peers this year still means reduced — and more attractive — valuations in the country’s stocks, Tan noted.