Tariffs to dent India Inc's Q2; Fed cut to benefit India most: Swastika MD

Recent US tariffs of up to 50 per cent on over half of India's exports are creating significant headwinds for Q2 FY26 corporate profits, says Nyati

The US imposition of 50 per cent tariffs on India will drag September quarter (Q2FY26) profit growth to single digits, tells SUNIL NYATI, chairman and MD of Swastika Investmart, in an email interview to Sirali Gupta. He adds that potential US Fed rate cuts could position India as a top-tier beneficiary among emerging markets. Edited excerpts:

How will the recent tariff changes impact corporate profitability and Q2 earnings, particularly for vulnerable sectors?

Recent US tariffs of up to 50 per cent on over half of India's exports are creating significant headwinds for Q2 FY26 corporate profits. While domestic demand and reforms offer some cushion, the tariffs could cut India's GDP growth by up to 0.5 per cent and reduce exports by $4–5 billion, likely dragging overall corporate profit growth to single digits in Q2.

 

 

Labour-intensive industries face the steepest hit, with exports down as much as 70 per cent, Q2 profits falling 10–20 per cent, and up to 2 million jobs at risk. In contrast, domestic-focused sectors like IT, pharma, and FMCG remain relatively resilient, supported by steady consumption.

 

Are the current GST reforms adequate to revive consumer demand, or do you see scope for further reform?

The recent GST reforms are a powerful "consumption booster" for the Indian economy. However, there is still room for further reform. Key items like petrol, diesel, and alcohol remain outside of the GST framework. Bringing them under GST would create a truly unified tax system and could further reduce prices for consumers, but it requires addressing complex revenue-sharing issues with states.

Could the GST reforms improve India’s attractiveness to FIIs? What would be the key triggers for foreign investors to return?

While GST reforms could boost corporate earnings and simplify business, making India more attractive to FIIs, their sustained return hinges on external factors. These include a favourable US monetary policy (weakening the dollar), resolution of the US-India tariff dispute, and clear evidence of earnings revival post-GST implementation.

If the US Fed cuts rates, which emerging markets are likely to benefit the most, and where would you place India?

If the US Fed cuts rates, India is likely to be a top-tier beneficiary among emerging markets. This is because lower US rates weaken the dollar and increase global risk appetite, making higher-growth economies like India more attractive to foreign investors.

 

India’s strong domestic demand offers a buffer, but US-India tariff disputes and uncertainty over earnings recovery may restrict FII inflows. A favourable global backdrop and clear evidence of sustainable profit growth are key for a bigger return of foreign investors.

How do you assess valuations in the current market?

Current market valuations in India are at a sustainable but full level. The Nifty 50's P/E ratio is around 21.9, which is above its historical average but not in extreme territory.

 

The current valuations are supported by a strong domestic growth story, driven by robust consumption and recent GST reforms that are expected to boost corporate earnings. While the valuations are not cheap, they are considered justifiable given India's status as the world's fastest-growing major economy.

 

The key risk is whether the anticipated earnings growth materialises. If corporate performance falls short of expectations or if global headwinds intensify, it could lead to a market correction.

With Sebi reportedly considering an increase in F&O contract tenure, what operational and strategic shifts do you foresee for Swastika Investmart?

The surge in India’s F&O market has attracted a new generation of investors. While much of it is speculative, we see it as an entry point that can help traders gradually mature into long-term investors. At Swastika, our strategy is to guide this transition with strong research and AI-driven tools, ensuring clients move from short-term trading to disciplined wealth creation.

How is Swastika Investmart using AI and analytics to expand its reach and enhance engagement with first-time retail investors?

Swastika Investmart leverages AI and analytics to provide evidence-backed, personalised recommendations tailored to each investor’s goals and risk appetite. This helps first-time investors receive simplified, actionable insights while our research team ensures every recommendation is validated.