Trump tariffs to hit exports; 7% upside in Nifty till Dec '25: Satish Menon

Markets are currently concerned about weak Q1 earnings and a faltering trade deal discussion between the US and India, Menon said, which may severely impact domestic exports

US President Donald Trump's order to impose 25 per cent tariffs on India, along with penalties for energy and defence purchases from Russia, could severely hurt Indian exports, says Satish Menon, executive director at Geojit Financial Investment. In an email interview with Nikita Vashisht, Menon shares insights on what's holding the markets back, why FIIs are selling, and Nifty50's latest targets in this backdrop. Edited excerpts:

 

What is holding the markets from resuming their uptrend? What are your Nifty targets for FY26? 

Markets are currently concerned about weak Q1 earnings and a faltering trade deal discussion between the US and India, which may severely impact domestic exports. Although the trend in Q1 results has shown some recent improvement, they largely remain in line with expectations and haven’t lifted market sentiment. Meanwhile, foreign institutional investors (FIIs) have increased their selling this month, while domestic institutional investors (DIIs) have moderated their buying compared to last month. We maintain our Nifty50 targets at 26,500 for December 2025 and 28,500 for December 2026.

 

What explains the sustained selling by Foreign Institutional Investors (FIIs)?

  FIIs' "sell in India, buy in emerging markets" strategy stems from India's premium valuation compared to other EMs. For instance, at the beginning of the year, the MSCI India index was trading at a 90-per cent premium to MSCI EM, well above the 10-year average of 65 per cent. We expect the selling to moderate as valuations have now corrected to near-average levels, and domestic earnings growth has been revised to 10–12 per cent for FY26, compared to flat growth in FY25.

 

How do you assess India Inc's Q1 earnings? What have been the key positive and negative surprises so far?

  Early-bird results were below expectations, particularly in the technology and financial sectors. We have, however, seen improved performance from NBFCs, private banks, and cement companies. Large-cap results are marginally better, while midcaps are catching up. Broadline PAT growth has improved to 11-13 per cent, slightly better on a sequential basis. We believe earnings growth could be upgraded in H2-CY2025, driven by falling input costs, a possible interest rate cut, a good monsoon, moderation in direct taxes, and improved consumer demand.

 

Do you expect IT company margins to come under pressure due to demand uncertainty, tariffs, and high employee costs? Or will more companies follow TCS' path in trimming expenses? What should be the stock strategy in this scenario?

  We expect margins to remain stable with an upside bias, thanks to cost-control measures, including adopting new technologies and better management of employee costs. While top-line growth is weak due to slower US spending, we expect growth to pick up in 2026. Additionally, IT sector valuations have declined to below their five-year averages, making them attractive for long-term investors.

 

Are there any unexplored or emerging themes in the markets that investors should watch?

  One underperforming area in the past two years is the consumption space—FMCG, durables, and discretionary sectors. We expect a pickup in the next 2-3 quarters due to stronger domestic demand, reduced competition from new players, and lower input costs. Currently, these sectors are trading below -1 standard deviation (SD) of their historical valuations, offering a favourable entry point for investors to increase their equity exposure.

 

Why has Geojit not ventured into discount broking? What is the company's roadmap in this regard?

  We have always been a full-service broker. Our purpose is to create wealth for clients, and encouraging frequent trading just to earn fees would be contrary to that mission. We focus on wealth management, particularly for mass affluent clients, using long-term investments—whether in stocks or mutual funds. We aim to build a business that genuinely helps clients grow their wealth.

 

Do you believe traditional wealth management is under threat from AI-driven advisory models? How is Geojit integrating AI into its offerings?

  Not at all. We believe AI will enhance traditional wealth management by equipping relationship managers (RMs) with data and tools to make better investment decisions. AI has improved RMs' efficiency, which allows them to serve more clients effectively. At Geojit, we're investing significantly in both in-house and outsourced tech solutions. We're integrating third-party software and building proprietary tools to fully leverage AI and technology. For us, AI isn't optional—it’s essential for future growth.

 

Have you observed any notable increase in derivatives volumes following the return of Jane Street?

  The daily average number of NSE index option contracts in H1 2025 has declined significantly compared to the same period last year. We attribute this contraction to regulatory changes, structural market adjustments, and shifts in institutional activity. A week after Sebi's interim order on index manipulation involving Jane Street, volumes rose by 20 per cent. However, we believe this spike cannot be directly attributed to Jane Street's return, as July has generally been a volatile month.