The new US tariffs on India should not be viewed as a reason to exit domestic equities, Jefferies strategist Christopher Wood said, calling them instead a reason to add exposure.
“GREED & fear would not view the previously discussed 50% tariff with the US as a reason to sell Indian equities. Rather, it is probably a reason to buy them since India is one country in the world where it pays to stand up to the Donald,” Wood wrote in a GREED & fear note.
The comments come after US President Donald Trump announced a 25% tariff on July 30, citing India’s purchases of Russian military equipment and energy. He followed with another 25% tariff on Aug. 6 over Indian imports of Russian crude.
Since July 30, India’s benchmark NSE Nifty 50 has declined 0.9% as of Aug. 14, though it pared losses with a 0.23% gain after the second announcement. The rupee also fell 0.16% against the dollar in the same period.
Wood framed India as better positioned than other emerging markets in the context of global trade and US-China tensions.
India Outlook
Jefferies kept a “marginal Overweight” stance on India in its Asia ex-Japan relative-return book. Wood wrote that “India represents the best long-term structural story in Asia.” He added that the focus for investors in the country “has always been on domestic demand.”
Indian equities are trading at 20.2 times one-year forward earnings, down from 22.4 times at the peak in October 2021, Wood noted, adding, “The MSCI India index is valued at a 67% premium to Asia ex-Japan, compared with a 10-year average of 63%.” Despite this, India has underperformed the broader index by 18 percentage points since mid-April and by 24 percentage points over the past year, Wood said.
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