Donald Trump's sticker shock on new H-1B visas and tariff tantrums have nothing on stocks that are focused on India's consumption story—thanks in no small measure to GST rate cuts.
While the Nifty IT index is down about 19%, Nifty Bank, Nifty Auto and Nifty India Consumption are up 8% to 19%, according to Bloomberg data.
“The government’s policy pivot to boost consumption via GST rate cuts and rationalisation offers near-term demand impulse and augurs well for domestic demand-driven sectors,” Bloomberg Intelligence's Nitin Chanduka said.
At the same time, an Allspring Global Investments is adding exposure to domestically driven sectors such as consumer and financials, which are supported by favourable macro data and policy tailwinds.
The $100,000 fee on new H-1B visas, as well as 50% US tariffs on India, have compounded troubles for India's IT services firms led by Tata Consultancy Services Ltd. and Infosys Ltd. The risks deepen margin pressures in an industry already grappling with tighter client budgets, disruption from artificial intelligence and unease from trade policy uncertainty.
For investors, these headwinds confronting global-facing firms reinforces the case for rotating into banks, consumer firms and infrastructure plays tied to a resilient local demand. As policy shocks from Washington make the prospects for India’s big IT firms murkier, the government is cutting goods and services tax to boost consumption.
{{/usCountry}}For investors, these headwinds confronting global-facing firms reinforces the case for rotating into banks, consumer firms and infrastructure plays tied to a resilient local demand. As policy shocks from Washington make the prospects for India’s big IT firms murkier, the government is cutting goods and services tax to boost consumption.
{{/usCountry}}Still, India remains the most expensive major stock market in Asia even after this year’s pullback. An even more stringent US trade or immigration policy may test investor confidence and the resilience of domestic demand.
However, an underperformance versus their emerging-market peers this year still means reduced—and more attractive—valuations for Indian stocks.