Markets will hope for a 'TACO' trade if better senses prevail: Nilesh Shah of Kotak Mutual Fund

Economic Times

31-07-2025

ETMarkets.com Following U.S. tariffs on Indian exports, experts suggest India should focus on growth-supportive reforms and leverage its GDP size.
Markets will hope for a 'TACO' trade if better sense prevails, said Nilesh Shah, Managing Director at Kotak Mahindra AMC, after U.S. President Donald Trump announced new tariffs on Indian exports.'China is defying U.S./UN sanctions on Iran oil, Myanmar and Russia trade, and North Korea support. The size and competitiveness of an economy have their advantages,' Shah said.He added that the unilateral imposition of tariffs should ideally push Indian policymakers toward more growth-supportive reforms. India's best deterrent remains the size and competitiveness of its GDP, he noted.
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US President Donald Trump announced a 25% tariff on Indian exports starting from August 1. Trump further hinted at unspecified penalties linked to India's continued energy and military purchases from Russia. This follows the earlier 26% reciprocal tariff imposed on India on April 2. Another expert says it is difficult to see how we reached a situation where we have 25% tariff + penalty and he had noted that Trump may be a messiah for Indian trade and investments and it seemed like a great opportunity to win in global markets.
'A 25% rate leaves us higher than Vietnam, Indonesia, and other competitor economies from Asia/EU. India had a potential chance to get a 10% rate from the US.. imagine the positive impact of that to the Indian economy and trade and investments,' said Arvind Chari, Chief Investment Strategist, Q India UK, affiliate of Quantum Advisors India.It should be deeply disappointing for the government and the foreign policy to have ended in this situation and with Trump there are always way outs and hope India can find one to get a better deal, Chari further mentioned.
Another expert believes that the current tariff announcement is much beyond trade and has far bigger geopolitical implications on the ongoing bilateral relations between India and US since Operation Sindoor and roots of this aggression lie in - four factors.
These factors include, firstly Indian denial of US role in ceasefire with Pakistan. Secondly, sustained buying of Russian crude, followed by continuous status of Russia as a key defence supplier and lastly growing strategic overtures of BRICS and attempts at forging a RIC (Russia, India, China) block which might disturb US geopolitical interests in SE Asia.
Also Read | 13 equity mutual funds with over Rs 1,000 NAV offer up to 24% CAGR since their inception 'We don't rule out some counter measures by India on US exports and the path to a trade deal is not easy given sticky issues like agriculture, dairy and defence. We expect an increase in uncertainty and market volatility in the near term. We believe companies which have higher US exports might see increased volatility,' said Amnish Aggarwal, Director - Research, Institutional Research, PL Capital.'Although the current earnings season has not shown any meaningful recovery in domestic demand, hopes of festival season demand revival will increase interest in domestic stories for the time being. Domestic consumption, hospitals, select consumer, Infra, capital Goods, AMC and private banks will act as a defensive hedge during these volatile times,' Aggarwal adds.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)