India not immune to global shocks, but relatively more resilient: IIFL Group's Nirmal Jain
Edited excerpts:
The escalation of global tariffs has created turbulence across markets, with US import duties at century-high levels. India's urgency to finalize a trade pact with the US is a strategic move in this setting.
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A timely deal can insulate Indian exporters from punitive tariffs—a 26% duty looms on some sectors if talks fail—and position India as a credible alternative in global supply chains. This potential decoupling from global trade tensions is already improving investor sentiment. So, while the trade war is a global headwind, India may emerge as a relative outperformer if the agreement materializes.
Opening up to US trade will inevitably expose Indian industries—especially those historically protected by high tariffs—to sharper competition. Sectors like dairy, agriculture, and some consumer goods may face short-term disruption. However, this competitive pressure can lead to consolidation, efficiency gains, and better quality standards in the medium term. The key is for Indian businesses to prepare proactively—invest in tech, scale up, and integrate with global value chains. With proper support, this shift can be a net positive.
Global slowdown invariably affects sentiment, but India remains a bright spot. Our 2025 GDP is still projected to grow around 6.8-7.0%, supported by domestic demand, capital expenditure, and a strong services sector. The government's supply-side reforms and PLI schemes are also bearing fruit. So, while FPI flows may remain cautious in the short run, long-only investors and global funds reallocating away from China continue to back the India story. Bottom line: India is decoupling, not immune—but relatively resilient.
The bounce from the 21,743 low reflects a technical recovery backed by fundamentals—robust earnings, policy continuity hopes, and relief that crude prices and US yields have stabilized. However, 2025 is still a macro-heavy year: elections (Bihar assembly), trade policy shifts, and interest rate inflection points. So, volatility is far from over. But this could be the year of rotational leadership—not a deep correction. Selective sector rotation and smart stock-picking will matter more than index timing.
• For those with gains: Rebalance, not exit. Use this strength to trim exposure in overheated small-caps or speculative themes. Allocate more to quality large caps and dividend-yield plays. Don't try to time the top—just reset risk.
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• For fresh investors: Start staggered. Deploy through Systematic Investment Plans (SIPs) or tactical buying during market dips. Focus on sectors where India has structural
momentum
—industrials, banking, manufacturing, and tech exports.
Patience and asset allocation will outperform timing.
The attractive sectors include Manufacturing & Capital Goods, which are benefiting from the PLI push and capex cycle; Private Banks & Financials , thanks to cleaner balance sheets, credit growth revival, and tech adoption; Defence & Railways due to long -term policy tailwinds and budgetary support; and IT with a selective bias for mid-sized firms tapping AI and cloud growth.
We are cautious on smaller NBFCs that face tighter funding and compliance oversight; small-cap momentum trades as valuations in many names are divorced from fundamentals; and Real Estate micro-caps which are Illiquid, opaque, and vulnerable to regulatory tightening.
Two themes stand out:
• The Securities and Exchange Board of India's push for transparency and T+0 settlement: While operationally disruptive in the short term, it will enhance market depth and credibility in the long term.
• The Reserve Bank of India's evolving stance on Non-Banking Financial Company governance and digital lending: This is reshaping risk appetite and business models. Well-governed, compliant firms will stand out.
At a broader level, India's regulatory posture remains reformist yet cautious, which bodes well for stability—especially important when global markets are jittery.
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