Portfolio rejig? What Trump's tariff order means for your investments

The key benchmark indices in India recovered to trade slightly lower after tumbling nearly one per cent during market opening

The Indian stock market moved cautiously on Thursday amid a global selloff as investors weighed the impact of US President Donald Trump’s wave of reciprocal tariffs, which threaten world trade and supply chains.

 

Against this backdrop, analysts suggest investors tilt their portfolios towards domestic-facing defensive sectors, which should help provide stability and shield them from geopolitical and tariff risks.

 

Within this space, Nomura Research favours telecom, staples, food, beverage, and hospitals & healthcare. In addition to them, banks and financials, according to the brokerage, are a good play as they will be less impacted by trade tensions.

 

Key benchmark indices recovered to end slightly lower, after tumbling nearly 1 per cent during market opening. The markets were able to recover as brokerages, such as Bernstein Research, highlighted that India would "safely" navigate the tariff challenges imposed by the US overnight. The brokerages also said that India may even benefit from China’s losses, triggering hopes for foreign inflows in the long run.

 

Pharmaceutical products and energy exports, which collectively account for nearly $9 billion in trade, have been exempted from the new tariff structure. Copper, pharmaceuticals, semiconductors, lumber, gold, silver, and certain energy products and minerals are exempt from import tariffs.

 

Those at Bernstein believe that sectors such as apparel and auto parts could see a dent in their fortunes in the backdrop of the sweeping tariffs. They added that India is protected from a competitive point of view but the risk in some sectors arises from a weakening US economy, with recession a possibility.

 

As a strategy, Bernstein has upgraded healthcare to “equal weight”, given its limited impact, and downgraded the information technology (IT) sector to “equal weight” as US recession risk rises. 

 

Market volatility is expected to remain elevated in the near term, according to Rajesh Palviya, head of technical research at Axis Securities. He recommends increasing cash allocations by up to 10 per cent and using market dips to systematically build positions in high-quality stocks.

 

Axis Securities remain overweight on large private sector banks, telecom, consumption, hospitals, and interest-rate proxies. Additionally, after the recent price correction, select capex-driven plays appear attractive due to their long-term domestic growth prospects, Palviya said. "Conversely, we maintain a downgrade stance on the IT sector as we anticipate continued weakness in discretionary IT spending in the US," he added.

 

Kapil Gupta and Prateek Parekh from Nuvama, too, have maintained a preference for defensive stocks post-Trump tariffs, adding that investors should position for a global risk-off. The brokerage is overweight on cyclicals with reasonable valuations and low margins, like private banks and insurance. Consumer, telecom, and pharma are Nuvama’s other favourites.

 

Nuvama also likes cyclicals with depressed margins in cement, chemicals, and quick-service restaurant (QSR) sectors. However, the brokerage is underweight on cyclical sectors like industrials, metals, and public sector undertakings (PSUs). It also downgraded IT to underweight, given high relative valuations.

 

The Trump administration imposed reciprocal higher tariffs on countries with which the US has the largest trade deficits, and levied a base tariff of 10 per cent on all trading countries. The US President imposed a 27 per cent tariff on imports from India, surpassing the 20 per cent levy on the European Union, 24 per cent on Japan, and 25 per cent on South Korea. Meanwhile, China faced a harsher blow, with tariffs of at least 54 per cent on many goods.