How should investors deal with tariff threats and tepid earnings? Samir Arora answers
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, Founder,, addresses investor concerns regarding US-India trade tensions , emphasizing the importance of avoiding overreactions to short-term issues. He suggested that if trade disputes are resolved quickly, excessive bearishness would be unwarranted. Arora also advised adjusting portfolios to account for tepid earnings growth and diversifying away from underperforming sectors, advocating for a mix of growth and established stocks.There has to be a measured bet here whether this is going to be long-term. If this is going to last only a few months and then a deal is done like it has been done with Japan, with the EU, and maybe one or two others where it started with an aggressive number from Mr Trump, then all this effort of being bearish would not be worth it.Second is that although India may have to figure out if these things really last, then what are the new friendship circles? , From a stock market point of view or from an economic point of view, there might be micro issues on some stocks here or there, but at a macro level, how can it matter so much if the entire Indian exports to the US are about 2-2.5%. Now, unless this expands to services, unless something happens which threatens the rest of the market and economy, there should not be too much reaction. Yesterday Switzerland reacted to a 39% tariff by closing down 15 basis points. Today India can react by being down 0.4%. So, we have suitably reacted.For this month, yes. But from February 1, we have got inflows and this month the initial selling could not be attributed to US-India issues. It was related to the fact that we may have had poor results in IT and maybe in some large consumer companies here or there and even the banks did not really do so well. So that is more to do with us. If you want to consider the US-India impact, that may be the last few percent, maybe 2% or something.Exactly. See, you do not react. I think you missed my main tweet. Over the last 30 years I have seen plague in Surat, the Asian crisis,Russian crisis, the global financial crisis as well as the 911 attack on parliament. In that context, this looks relatively less harmful. It is harmful, but not to any extent to which you can react in a significant way.Also one or two textile apparel exporters are down. Now what to do? But other than these one or two, if somebody has in a portfolio 3%, 4%, 2% that you have to wait and hope that this also works itself out because in the end these rates will not last. Otherwise you move on. Move on means you do not have to buy today if you do not want to. But generally, it is okay.You deal with that by not having so much of your portfolio and stocks that have been lacklustre and you buy some of these 100% growth guys; not all of them, but 10-20% in that and you have to have a mix of stocks because the issue is that if you look at the large three pools, then the IT pool is not doing well or growing maybe 5% or less and the consumer guys will grow 5% to 8-9-10% and the financials will grow 8-10% to 15%.So, as of now, no one is pulling up the whole group as in the aggregate numbers but plus-minus two-three quarters that should be okay. In the meantime, you lower your expectations and hope to make 10% annualised because earnings growth on aggregate is plus-minus 10%. But be confident of the fact that over time India will get some more flows than they have recently because there is a clear trend of diversification away from the US.Looking at different indices, there is the all country world index and then the regular MSEI world. Basically US weight in those is very high and for the first time in many years, we can see it in world ex-US ETFs and in emerging markets and also that the flows are going out or that US exposure is becoming a little less maybe with new money or old money going out. Plus the fact that after many years, the world ex-US is outperforming US and you can see it in the fact that people are worried about currency and the fact that they are hiding in gold and then they are reading books like the one written by Ray Dalio on what happens when countries go broke and basically he is talking about the US.So, for whatever reason, there will be slight diversification or a lot of diversification away from the US and even a small diversification will help the ex-US world because that world is much smaller than US and in that we also have valid claim to get some flows plus-minus a few months here or there, and which we are already getting. From February 1, we have positive flows.
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