India emerges as Trump-proof safe haven as emerging markets rebound

Time of India

23-04-2025

India is emerging as a resilient haven amid a rebound in emerging market sentiment, driven by its domestic-focused economy and more attractive valuations. HSBC's Herald Van Der Linde highlights India's insulation from global trade tensions and steady earnings growth as key factors drawing investor interest, especially in sectors like banking, consumption, and healthcare, despite ongoing global uncertainties.
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India's domestic focus shields it from global trade uncertainty
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Manufacturing growth signals confidence
Sector focus: Banks, Consumption, and Healthcare stand out
India's valuation reset sparks renewed interest
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India is emerging as a relatively Trump-proof haven amid the broader rebound in emerging market sentiment. According to Herald Van Der Linde, HSBC's Head of Asia Pacific Equity Strategy, the country's strong domestic focus and more attractive valuations are rekindling investor interest.Emerging market investor sentiment improved on Wednesday as Asian equities rose and regional currencies softened against a firmer U.S. dollar, following remarks from U.S. President Donald Trump that eased concerns over Federal Reserve independence and future China tariffs.According to Van Der Linde, interest in emerging markets had begun to revive even before the latest geopolitical developments. 'The growth outlook was starting to get better... particularly in China and some others, while India was a bit of an outlier,' he said in an interview with ET Now. However, with tariffs and policy uncertainty reshaping the global investment landscape, markets with strong domestic drivers are gaining favour.Van Der Linde explained that India's relatively insulated position in the current geopolitical environment makes it a more attractive investment destination. "If you are a market that is largely domestically oriented, not so much exposed to trade, and... where valuations look more reasonable than a year ago, these start to look interesting," he said. Unlike other Asian economies such as South Korea, Taiwan, and Japan, which are heavily reliant on exports to the U.S., India's economy is driven more by domestic consumption and services.Despite global growth slowing down due to trade tensions, India's economy remains structurally sound. "Growth is slowing, but still the feeling is that structurally growth in India over the next couple of years should be okay,' Van Der Linde said. 'Earnings growth somewhere between 10% to 15%... in the current kind of global environment that does not look too bad.' This outlook is significantly more favourable than that for export-dependent markets, where the impact of tariffs has been more severe.India's strong domestic story is further supported by robust economic data. The country's private sector showed robust growth in April, driven by strong demand, particularly from international markets, which further underscores the nation's domestic resilience. The HSBC flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 60.0 in April, up from 59.5 in March. This marked the strongest pace of combined manufacturing and services growth since August, Reuters reported.Manufacturing growth played a central role in the strong performance, with the index rising to 58.4 from 58.1, reaching its highest level in a year. Meanwhile, the services PMI index also showed positive momentum, climbing to a four-month high of 59.1 from 58.5 in March. The growth outlook for India continues to be positive, with strong demand from both domestic and international markets, Van Der Linde said.Turning to sectors of interest within India, Van Der Linde highlighted that large liquid sectors with reasonable valuations are attracting foreign investor attention. 'The sectors that we talk about with mostly foreign investors are to a large extent large liquid sectors where valuations are reasonable,' he said. Specifically, private banks, as well as sectors with growth stories insulated from macroeconomic swings, are particularly appealing.'Think about, for example, rising consumption or demand for medical and healthcare in India, such as hospitals,' Van Der Linde said. The shift toward consumption-driven growth is one of the key factors that differentiate India from other emerging markets where export-driven sectors dominate.Also read | Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first? HSBC's cautious stance on India in the past year has shifted, with Van Der Linde noting that market conditions now look more balanced. "Valuations are lower, and the realisation that earnings growth is not going to be as fantastic as it was over the last couple of years is now well priced into the market," he said. With some policy support potentially on the horizon, India's equity market looks increasingly attractive to investors seeking stability amidst global uncertainty.However, Van Der Linde emphasised that the broader market environment remains volatile. The uncertainty stemming from U.S. trade policies and other global factors continues to create challenges for businesses trying to make investment decisions. "It's that uncertainty to investments primarily by firms that is really leading to a sort of dislocation in markets," he noted.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)