 "Tariff Impact: Emkay says buy the dip, stick to discretionary, industrials")
Emkay on Trump tariffs, India impact: Domestic brokerage firm Emkay has advised investors to look through the near-term volatility triggered by the US imposing an effective 50 per cent tariff on Indian imports. While acknowledging that the situation poses considerably elevated risks, the brokerage maintained its positive stance on India’s medium-term prospects and recommends investors buy a substantial dip (of more than 5 per cent) if markets correct meaningfully.
The US has imposed a 25 per cent penalty via executive order, which takes the total tariff burden to 50 per cent on select Indian goods. Emkay said this move would decimate Indian exporters to the US, with tariffs well above that for Asian peers and eliminating any advantage versus China.
However, the brokerage noted that this may not be a done deal as there is a “21-day off-ramp” before the effective date of August 27, 2025, which leaves the door open for a negotiated settlement. One potential route to a compromise lies in the “reduction rather than complete cessation of contentious oil imports from Russia.”
Tariffs impact on Indian markets
On the potential impact to India, Emkay reiterated that the direct impact on listed market earnings is limited. However, it warns of second-order hits on employment-heavy sectors like textiles and jewellery as exports come to a near-complete halt. The government is expected to step in with fiscal support and measures to protect banks from potential non-performing loans (NPLs).
While a short-term vicious cycle involving current account deficit (CAD) worries, rupee weakness, FPI selling, and a correction in equities may play out, Emkay viewed this as short-lived. ALSO READ: Trump's first tranche of 25% tariffs on Indian imports take effect
Sector-view
On sector implications, Emkay identified the most-impacted areas as textiles (Gokaldas/Kitex), chemicals (Camlin, Aarti and Atul), and auto ancillaries (Bharat Forge/Suprajit/Sona BLW), with direct export exposure to the US.
Additionally, if India cuts Russian crude imports, Reliance and the oil marketing companies (OMCs) are vulnerable, and crude prices could spike. On a relatively safer footing are pharma and EMS, which appear to be exempt for now, although the brokerage flagged that a possible announcement by Apple later today could hurt EMS sentiment.
Given the complexity of the evolving situation, Emkay cautioned that “trying to trade this uncertainty is highly risky,” with too many variables at play – renegotiated tariffs, sectoral carve-outs and carve-ins, and India slowing Russian oil imports.
Thus, the brokerage recommends that investors minimise exposure to export-oriented and globally exposed sectors and instead buy the dip if the market correction goes above 5 per cent from here, as valuations would then be comfortable at well below the long-term average (LTA).
Despite the turmoil, Emkay’s sector stance remains unchanged. Consumer Discretionary and Industrials are the two over-weight (OW) sectors, while the brokerage stays under-weight (UW) on Financials, Technology, and Staples.
India’s high dependence on domestic consumption and the expected H2FY26 consumption-led recovery form the basis of the brokerages’ continued optimism.
In a tough environment where “investors (are) driving without headlights,” Emkay suggests investors’ stay invested, avoid panic, and be ready to act if valuations correct meaningfully.