The relationship between India and the United States has deepened significantly in recent decades, with both nations becoming strategic partners. However, beneath the surface of this strong alliance, a complex web of trade tensions and disputes has emerged. For an Indian investor, understanding these trade dynamics is not just a matter of global affairs; it's a critical component of risk assessment and investment strategy. Recent announcements regarding tariffs and trade barriers have sent ripples through the markets, making it imperative to analyze the "why" and "what next" of this evolving situation.
Let's delve into the core issues driving the India-US trade friction, its potential impact on the Indian economy and markets, and how investors can navigate this new landscape.
The recent escalation in trade tensions is not an isolated event. It stems from long-standing disagreements and a clash of economic philosophies. From the US perspective, the main points of contention often revolve around:
In response, the Indian government has maintained its stance, prioritizing national interests and strategic autonomy. The government emphasizes the need to protect its vast agricultural sector and MSMEs, which are crucial for employment and economic stability. India’s stance is rooted in its sovereign right to set its own policies to protect its economy and its people.
The imposition of tariffs by the US is not a blanket measure; its effects are felt most acutely by specific sectors that form the backbone of India's export economy to the US. With a 25% tariff being imposed on all Indian goods, the following sectors are likely to feel the heat:
India is a global powerhouse in generic drug manufacturing, and the US is its largest market, accounting for a significant portion of its pharmaceutical exports. The new tariffs could raise the cost of Indian-made generic drugs in the US, potentially affecting the competitiveness of Indian pharma companies and squeezing their profit margins. This could lead to a short-term correction in the stock prices of major pharmaceutical companies and create uncertainty in the sector.
These are highly labour-intensive sectors that employ millions of people in India. The US is a primary destination for Indian gems, jewellery, and textile products. A 25% tariff makes these Indian goods more expensive for American buyers, potentially shifting demand to other countries like Vietnam or Bangladesh, which may face lower tariffs. This could lead to a decline in export orders and put pressure on the profitability of companies in these sectors.
While India’s exports of finished electronics to the US are growing, particularly in the smartphone segment, the tariffs could disrupt this promising growth story. Many global companies, including giants like Apple, have been expanding their manufacturing in India as part of a China-plus-one strategy. The tariffs could complicate these supply chains and make Indian-assembled products less attractive. Similarly, while not directly impacted by goods tariffs, the overall climate of trade tension can create uncertainty for the IT services sector, which heavily relies on business from the US.
The trade tensions don't just affect specific companies; they can have a broader impact on the Indian economy and financial markets.
For investors, the current trade environment calls for a calm and calculated approach, not panic.
Frequently Asked Questions
1. How do these trade tensions affect the average Indian investor?
These tensions can create market volatility, affecting the stock prices of companies, particularly those with significant exposure to the US market. They can also lead to currency fluctuations, which may impact inflation and the cost of imports.
2. Is India at a disadvantage in these negotiations?
India is a major global economic power with a rapidly growing market, giving it significant leverage. The Indian government has shown a clear resolve to protect its national interests, including the welfare of farmers and MSMEs. The ongoing negotiations are a reflection of both countries trying to secure the best possible terms for their respective economies.
3. What is the role of the Indian government and regulators like SEBI in this?
The government is engaged in diplomatic negotiations to find a mutually beneficial solution. Meanwhile, SEBI ensures market integrity and stability, putting in place regulations to prevent market manipulation and protect retail investors during periods of heightened volatility.
4. Should I sell my shares of export-oriented companies?
Panic selling is often the wrong move. Instead, analyze your portfolio. If a company has strong fundamentals, a diversified revenue stream, and a robust business model, it is likely to recover. Consider a long-term perspective rather than reacting to short-term news cycles.
The current trade friction between India and the US is a complex challenge, but it is also a reminder that global markets are interconnected and subject to geopolitical forces. For investors, this environment underscores the importance of a well-researched, disciplined, and long-term investment strategy.
At Swastika Investmart, we provide the expertise and tools to help you make sense of these complex market dynamics. Our SEBI-registered team of research analysts offers insightful reports and market commentary, helping you identify opportunities and risks in a volatile landscape. We are committed to investor education, empowering you with the knowledge to make informed decisions and build a resilient portfolio that can withstand any market challenge.
Like all other countries, Indian investors also have a strong home bias – all their investments will be in India. But there are many opportunities for investments outside of India as well. Further, some global markets have done very well so it is worth exploring investment opportunities outside India too.
In the past, the lack of international exchange-traded funds (ETFs) and mutual funds made global diversification difficult for the average investor, but these days, with lots of opportunities there’s no excuse for the so-called “home bias”.
According to the International Monetary Fund (IMF), in purchasing power parity (PPP), terms in the world’s GDP India contributes only 7.98%, which clearly shows Indian investors have little participation in the overall world’s economic growth.
Two of the major reasons why people invest in international investments and investments with some international exposure are:
International investing might help the investors to spread their investment risk among different foreign companies and markets in addition to different companies and markets.
In emerging markets. It takes advantage of the potential for growth in some foreign economies.
Here, we’ll take a look at how the average investor can build a globally diversified portfolio...
International Funds invest in all countries exceptional of the country in which you reside. while Global Funds invest in all countries around the globe with no exception.
ETFs are a collection of securities that tracks an underlying index such as stocks, however, they can invest in different sectors.
Investors can choose between many different types of mutual funds or ETFs, including:
There are numerous funds which are dedicated to investing in offshore assets, with some devoted to themes such as commodities, EMs, Global smaller cap companies, Debt mutual funds, National Pension Systems, Public Provident Funds, Bank fixed deposit, Senior Citizens' Saving Scheme, Real Estate, Gold. etc. Along with them, there are equity funds that invest the majority of their assets in Indian shares, while also investing a trivial part of their portfolio in global listed equity. The investor’s fear of the risks while investing abroad is about the asset’s level of volatility – that is, how widely its price differs over time. There is currency risk which restricts the changes in the exchange rate against the investor’s home currency. Investors should study qualitative risk factors – like geopolitical risks and bond ratings, and political risk can have serious effects on a nation's economy.
Offshore investing is an attractive idea, given the ease and the low cost through which it can be done through mutual funds. Additionally, it also includes diversification as well as provides access to some of the best-performing companies in the world. Let’s have a look at the other benefits involved in investing globally.
People want to invest in the companies of their choice such as Apple, Facebook, Amazon, etc.
Investing globally helps in diversification. It can reduce the risk in your portfolio as the locals might not have a reasonable effect on the international markets.
There may be better and more profitable opportunities available in international markets.
Many international countries offer attractive tax incentives to foreign investors in order to attract their wealth.
Investing internationally gives a bigger benefit for more growth which also means an increase in return potential in overseas investments.
Many foreign financial institutions are able to protect your investments from confiscation and other threats. They are also concerned with confidentiality regarding your finances.
Market-linked investments have the potential of high returns but they carry high risks as well. Fixed-income investments help in accumulating the accumulated wealth in order to meet the desired goal there are some investments that are fixed-income while others are financial market-linked. Both fixed-income and market-linked investments play a major role in the process of wealth creation.
IPOs are on the boom and many companies want to go public. In CY20 we saw many companies got listed and generated wealth for the investors. In 2017, we saw companies going public in bulk, and yet again in 2021 we expect the same trend will continue with many well-known companies trying to go public. In the few months, we may see few companies getting listed such as Kalyan Jewellers, Suryoday Small Finance Bank, ESAF Small Finance Bank, Nazara Technologies, RailTel Corporation, Sigachi Industries, Heranba Industries, Antony Waste Handling Cell, Mrs Bectors Food Specialities, Indigo Paints, Nureca and Stove Kraft. We recently saw Burger Kings subscribe 157 times which suggests that there will be demand for fundamentally sound companies. Along with the above-stated companies, there are few other companies on which we should keep an eye.
Life Insurance Corporation of India which is abbreviated as LIC is an Indian state-owned insurance group and investment corporation owned by the Government of India. LIC was founded on 1st September 1956 under the LIC act 1956. LIC started its operations with 5 crores which have now reached 31 lakh crore. LIC currently has 8 zonal offices, 113 divisional offices, 2,048 branch offices, and 12 lakhs+ agents which are present in 14 countries.
LIC IPO is a dream come true for many investors which might go public in 2021 which will be one of the biggest IPO in the Indian market. It is expected that it would hold the same limelight as Aramco IPO. Deloitte has been fixed as the pre-initial public offer (IPO) transaction advisors and it is expected that LIC will sell up to 10% of the stake in the IPO and IPO size is expected to be in between Rs. 80,000 crore to Rs. 1 lakh crore.
National Commodity & Derivatives Exchange Limited which is abbreviated as NCDEX is an online commodity exchange based in India. NCDEX is the leading agricultural commodity exchange in India which was incorporated on 23rd April 2003. NCDEX has offices in Mumbai, Delhi, Ahmedabad, Indore, Hyderabad, Jaipur, and Kolkata. NCDEX’s network comprised 380 members, 13,316 terminals, nine WSPs, 12 clearing banks, 41 financial institutions, and 246 FPOs representing 461,619 farmers, thereby encouraging a virtuous cycle, as of September 2019.
NCDEX would be the third exchange to get listed in the Indian Stock market after BSE and MCX. NCDEX is expected to launch its IPO in CY 21 and the IPO size is expected to be around Rs. 500 crore. ICICI Securities Limited and SBI Capital Markets Limited has been fixed as the lead manager to handle the IPO.
National Securities Depository Limited abbreviated as NSDL is an Indian central securities depository headquartered in Mumbai which was established in August 1996. NSDL has 276 depository participants in its network through which it provides depository services to the investors, custodians, issuer companies, stockbrokers and stock exchange.
NSDL would be the second depository to get listed on the exchange after CDSL. Currently, NSE and IDBI bank hold 24% and 30% stake in the company. It is expected that IPO size might be of Rs. 1000 and the promoters might sell up to 30% stake in the company.
Barbeque Nation is one of the fastest-growing casual dining restaurant chains in India. Barbeque Nation was originally incorporated as Sanchi Hotels Private Limited on October 13, 2006, at Indore, Madhya Pradesh by one of its promoters. Barbeque Nation has around 138 outlets across India and 7 outlets in the UAE, Oman, and Malaysia.
The IPO might comprise an OFS of 98,22,947 shares and a fresh issue of Rs. 275 crore as per the draft papers filed with the SEBI. It is expected that the IPO size will be approximately Rs. 1000 crore to Rs. 1200 crore and will be managed by IIFL Securities, Axis Capital, Ambit Capital and SBI Capital Markets.
In CY we saw there was a high demand for good IPO such as Happiest Minds, Mazagaon Dock and Burger Kings. It is expected the demand will boost further next year in the fundamentally sound IPO. We suggest the investors keep an eye on quality companies and bet for them in the IPO.
We all have some desires in life and we work hard to fulfill them at any cost, sometimes it takes less time to achieve them. But how it can be done, you cannot plant money on trees we all need to work to earn.
But human nature desires keep on increasing with the span of time and along with desires earning should need to be increased. In this time of inflation, an individual always thought of how to save his money from unnecessary expenditure, but in this is life anything can happen which makes a difference in a very small time.
One should plan everything in a systematic manner where the unplanned event won't harm his earnings. Though still some of us take more time to decide what can be done to avoid all such events. Many often we never discuss how we can plan our money to invest in such a manner where regular earning can be generated along with we will be able to face inflation too.
Our parents and grandparents always suggested investing in those traditional instruments which take a lot of time to grow and sometimes it is hard to keep them with us. But at last, we need to follow what our mind says.
" I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful" Warren Buffet.
One should be ready to invest when the market is down and come out when it's on highs.
Here are some important benefits we get when we invest in the stock market.
The stock market investment will give long term benefits which prevent our wealth from the impact of inflation.
As compare to other financial instruments buying & selling of stocks are easier and in a convenient manner.
When the economy is on a growing stage, earnings of the corporate also increased, therefore if purchased any good quality company, benefits are there in terms of quality returns.
It is not easy to start any business which we think of, but just because we like it we can become a partial owner of that. After purchasing shares of any of our favorite businesses we get the right to vote and we become a partial owner of it.
Along with the growth in the share prices companies also providing additional benefits in the form of dividends which is actually a part of sharing from the profit that the company earns in a financial year.
सप्ताह के अंत मे डॉलर इंडेक्स मे निचले स्तरों से उछाल आने के कारण कीमती धातुओं मे ऊपरी स्तरों पर बिकवाली का दबाव बनता दिखा लेकिन सप्ताह मे सोना बढ़त के साथ बंद हुआ है। सोने के भाव सप्ताह मे 2 प्रतिशत तेज़ हुए जबकि चाँदी के भाव 0.5 प्रतिशत की मामुली गिरावट पर रहे है।
अमेरिकी कांग्रेस की तरफ से जल्द ही तीसरा कोरोना वायरस राहत पैकेज आने की उम्मीद मे कीमती धातुओं के भाव को सपोर्ट मिला हुआ है। मुद्रास्फीति बढ़ने पर अधिक पैसा छापना हमेशा कीमती धातुओं की कीमतों को बढ़ाने के लिए एक प्रमुख घटक रहा है।
फेडरल रिजर्व द्वारा महामारी से प्रभावित अर्थव्यवस्था की मदद के लिए और अधिक बॉन्ड खरीदने के कदम, कीमती धातुओं के लिए सकारात्मक है। अमेरिका से राहत पैकेज मिलने की उम्मीद मे निवेशकों द्वारा कीमती धातुओं मे निवेश का रुझान बरक़रार है।
अमेरिकी फेडरल बैंक के प्रति माह कम से कम 80 बिलियन डॉलर और प्रति माह 40 बिलियन डॉलर की एजेंसी बंधक-समर्थित प्रतिभूति खरीदने के लिए फेड का निर्णय, अमेरिकियों को अधिकतम रोज़गार और अर्थव्यवस्था को स्थिरता प्रदान करने के लिए है। डॉलर इंडेक्स मे लगातार गिरावट जारी रहने से रुपय मे मजबूती बनी हुई है जिससे घरेलु वायदा बाजार मे सोने की कीमतों मे ऊपरी स्तरों पर दबाव देखा गया है।
कीमती धातुओं के फंडामेंटल मजबूत है लेकिन इस सप्ताह क्रिसमस हॉलिडे के चलते कीमतों मे ऊपरी स्तरों पर दबाव रह सकता है। कॉमेक्स वायदा सोने मे 1900 डॉलर पर प्रतिरोध है और 1850 डॉलर पर सपोर्ट है। फरवरी घरेलु वायदा सोने मे 50700 रुपय पर प्रतिरोध और 49000 रुपय पर सपोर्ट है। चाँदी मे भी ऊपरी स्तरों पर दबाव रहने सम्भावना है। और इसमें 67000 रुपय पर सपोर्ट तथा 68500 पर प्रतिरोध है।
Nifty & Sensex are rejoicing at a new all-time for the sixth consecutive week on the back of global liquidity.
Wow! It was the seventh consecutive week when the Indian equity market ended with gain whereas it was a sixth consecutive week where Nifty and Sensex ended at new heights. Nifty hits high of 13772 whereas Sensex hit a high of 47026 and they both ended with a weekly gain of around 2%. If we talk about last week’s outperformer then Pharma and IT sector lead the rally where the Nifty Pharma index gained 3.21% and the Nifty IT index gained 2.61%.
The most important question is what is propelling such a stellar rally in the market. So the answer in one word is “liquidity”. Yes, it is the liquidity that is causing rally across all asset classes whether it is Equity, Gold, Silver, Crude Oil, Metal, and even Bitcoin which has crossed the $20000 mark for the first time in history.
There was a US fed meeting last week where they kept interest rates unchanged which is near to zero and raised US GDP forecast to 4.2% from 4% but the main outcome of the meeting was the speech of Fed chairman Jerome Powell where he says that interest rates will continue to remain low and Fed will continue its bond-buying program to infuse liquidity in the system which is the reason for bullish trend got further momentum.
If we analyze the data then FIIs who are the main drivers of this rally bought Rs. 11804Cr while DIIs are still in the selling mode who sold Rs. 11023cr last week.
If we talk about the F&O data then FIIs’ long exposure in Index future stands at 68% vs 77% last week while PCR is trading at 1.62 level which is a comfortable level but once it had reached to 1.89 marks last week that’s why we saw a profit booking in the first half of Friday’s trading session.
Nifty is in strong bullish momentum but 13770-13820 is an immediate resistance zone where it can see some supply pressure above this 13873/13985 will be the next resistance levels. On the downside 13650 will be an immediate and key support point because below 13650, there will risk of profit booking towards 20-DMA of 13300 where 13500 would be an intermediate support level.
Banknifty is facing resistance in supply zone of 30800-31000 where 30200-30000 is an immediate and critical demand zone; below this, there will be a risk of any serious profit booking where 29000 will be the next important support level while if it manages to take out 31000 levels then we can expect a rally towards 31500/32000 levels.
Important cues for the Next Week:
Crude oil price is trading at a nine-month high after declining in last week US crude inventory data and showing optimistic views over the coronavirus relief package in the US. However, upside movement is controlled due to the increase in Gasoline Inventory and lower fuel demand.
U.S. West Texas Intermediate (WTI) crude oil futures shined by 25 cents, 0.46%, from $47.62 to $ 47.84 a barrel. Brent Crude Future rose by 32 cents, or 0.63%, from %50.76 to $51.08. Both benchmarks are trading near nine months high, which is high near early march.
Also, on Wednesday the US Fed announces that the interest rate will remain unchanged, which is 0.25% and in addition adds a stimulus package to boost the relief in Coronavirus and unemployment.
At the same time due to a boost in logistics and e-commerce driven trucking and transportation diesel consumption increased, which is signalling a positive strength to the petroleum market. Higher diesel prices are adding more profits for refineries from processing a barrel of light crude to fuel.
Meanwhile, the oil market outlook is mixed as increased gasoline inventory and lower fuel demand is showing some pressure, while at the same time declining US crude inventory and stimulus relief are adding positive strength in the market.
Similarly, on a technical chart MCX Crude Oil price has shifted above the 138.2% Fibonacci Retracement price extension level 3479 and 100 days SMA’s level 3476, which will act as immediate support levels for the counter. An indicator RSI(14) is moving above level 60, which has witnessed bullish sentiments in the counter for the short term. On the other hand, the price may face resistance near 3750-3770, which is above near 200 points from CMP, which means crude oil price has more upside strength till 3700.
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