Use any tariff-triggered market correction to buy, says Jitendra Gohil

India is in a unique position where the return on equity for BSE 500 companies is among the best globally, second only to the US, says Gohil

Foreign investors are increasingly viewing India as a distinct market rather than a subset of the broader emerging market (EM) basket, says Jitendra Gohil, chief investment strategist, Kotak Alternate Asset Managers, in an email interview with Puneet Wadhwa. Edited excerpts:

 

How do you interpret Donald Trump’s tariffs on India from a market standpoint?

 

A 25 per cent tariff could spark some knee-jerk market reaction. The rupee might weaken further. Still, given India’s limited reliance on exports, this alone is unlikely to throw its macroeconomic (macro) stability or growth prospects off course. Tariffs should also be viewed in the context of how other export-heavy countries like Vietnam and China are affected. 

India recently signed a deal with the UK, and negotiations with Europe are ongoing. It’s also gradually opening the door to Chinese investments. Any sharp correction in Indian equities triggered by Trump’s tariffs should be used as a buying opportunity. Negotiations with the US are likely to continue until both sides find a mutually acceptable deal. 

Do you see any triggers that could push markets higher from here?

 

There are quite a few. A good monsoon and a recovery in rural demand stand out. Budget-driven tax cuts, combined with the rollout of the Eighth Pay Commission, could support consumption — especially heading into the festival season and beyond.

 

The Reserve Bank of India still has headroom to cut rates and inject more liquidity, which could act as a further catalyst. And India opening up to Chinese capital could be a material trigger for the electronics manufacturing space.

 

How concerned are foreign institutional investors (FIIs) about regulatory uncertainty in India?

 

Foreign investors are no longer lumping India in with the rest of the EM pack; they’re starting to view it as a distinct market. That shift is gaining ground. Given India’s macro stability, long-term investors are increasingly enthusiastic about participating in India’s growth story. The bigger sticking point now is the valuation of Indian assets, although political and regulatory stability has improved. 

 

Do you see big money moving to other markets?

 

Last year’s EM outflows hit across the board; they weren’t India-specific. Outside India, we favour the US. Germany’s tilt towards fiscal expansion is intriguing, and in Europe, defence and energy stocks look attractive. We remain sceptical of China despite its real strides in technology and artificial intelligence. But the investment case is clouded by geopolitics, especially the risk of a Taiwan invasion and any resulting sanctions.

 

How is the market responding to worries around valuations?

 

Markets tend to reward easier fiscal and monetary policies, as short-term capital chases quicker returns in economies with expansionary government policies. But India stands out: it’s the only major economy where both the fiscal deficit and debt-to-gross domestic product ratio are expected to decline over the next three years. Over time, this macro prudence and stability should help compress the risk premium on Indian assets. That means equities could continue trading at a premium, even if that means they remain overvalued.

 

Competitive intensity versus balance-sheet strength: how does India Inc stack up?

 

India is in a unique position where the return on equity for BSE 500 companies is among the best globally, second only to the US. Margins are at multi-decade highs, and for BSE 500 firms (excluding financials), the debt-to-earnings before interest, tax, depreciation, and amortisation ratio is at multi-year lows.

 

Meanwhile, the cost of doing business in India is falling, while it’s rising dramatically in developed markets. That creates a perfect environment for increased competitive intensity. This transformation is already underway, with new businesses chipping away at incumbents in most sectors, except aviation, automotive, and telecommunications.

 

Still, it’s not always the big names getting bigger. A lot of the real growth is coming from outside the bellwether companies that make up the Nifty 100. New sectors and companies are emerging that could become major players in the future, although some may fail or go bankrupt. 

The valuation paradox:Notes from a mkt in flux

  * Tariffs = Tactical entry points:

India’s low export reliance blunts Trump-era trade noise 

  * India exits EM chorus:

FIIs treat it as a distinct story, not just another EM ticker 

  * Consumption gears up:

Monsoon lift, tax relief, 8th Pay Commission payouts set the stage for a festive bump 

  * Valuations stay frothy:

Political calm soothes nerves, but price tags still spook value hunters 

  *Outside Nifty 100, churn begins:

Growth pockets forming under the radar, beyond the usual suspects