Market expert Sunil Subramaniam has offered insights on the Indian markets' outlook in light of impending US tariffs on Indian goods. According to Subramaniam, the markets are well-prepared for the tariffs set to take effect on August 27, with investors having already factored this development into their strategies.

Market Consolidation Expected

Subramaniam anticipates a period of consolidation for Indian markets rather than sharp corrections. This stability is expected despite the implementation of US tariffs, which he believes have been largely priced in by market participants.

Foreign and Domestic Investment Dynamics

The expert points out that foreign institutional investor (FII) flows are likely to remain subdued. Two key factors contribute to this outlook:

• High valuations in the Indian market
• Ongoing trade uncertainties

However, Subramaniam expects domestic investors to continue providing support to the market through a strategy of sectoral rotation.

Sectoral Opportunities

Capital Goods Sector

Subramaniam highlights promising opportunities in the capital goods sector, driven by robust domestic demand. He notes that private capital expenditure (capex) is showing encouraging signs, with capacity utilization approaching 80%.

Automotive Sector

The auto sector is poised for strong festive demand across various segments:

• Two-wheelers
• Entry-level cars
• Tractors
• Commercial vehicles

However, Subramaniam cautions that export-oriented components within the automotive industry may face some pressure.

Pharmaceutical Sector

The pharmaceutical sector presents a mixed outlook:

• Strong domestic growth prospects
• Potential concerns related to tariffs

Interestingly, Subramaniam suggests that US drug price cuts could potentially benefit Indian contract manufacturers through increased outsourcing.

Conclusion

Despite the looming US tariffs, Subramaniam's analysis paints a picture of resilience for Indian markets. The expert's insights suggest that while certain sectors may face challenges, others are well-positioned to capitalize on domestic demand and potential global shifts in manufacturing and outsourcing practices.

Investors and market participants will likely be watching closely to see how these predictions play out in the coming months, particularly as the festive season approaches and the impact of the new tariffs begins to materialize.

Shibani Sircar Kurian, a representative from Kotak Mahindra Asset Management, has shared an optimistic outlook for the Indian market, projecting low double-digit earnings growth for the fiscal year 2026. This growth is expected to be driven by improving domestic demand trends and supported by various policy measures aimed at boosting consumption.

Policy Measures to Boost Domestic Consumption

Several key policy initiatives are expected to play a crucial role in stimulating domestic consumption:

• Tax cuts for mass income segments
• Anticipated rate cuts by the Reserve Bank of India (RBI)
• GST rationalization

These measures are designed to increase disposable income and encourage spending across various sectors of the economy.

Rural Economy Shows Promise

The rural economy is showing signs of revival, contributing to the positive outlook:

• Favorable monsoons are expected to boost agricultural output
• Rising rural demand is observed
• Real rural wages are moving up
• Inflation remains under control, supporting purchasing power

Sectors Poised for Growth

Automobile Sector

The automobile industry is well-positioned to benefit from the improving economic conditions:

• Two-wheelers expected to see increased demand
• Entry-level four-wheelers likely to experience growth
• Policy supports and improving rural demand to drive sales

Fertilizer Sector

The fertilizer sector is also anticipated to perform well:

• Good monsoons to boost agricultural activities
• Recent policy announcements favorable for the sector
• China's lifting of export curbs on fertilizers to potentially benefit Indian companies

China's Policy Shift

China's decision to lift export curbs on several key products is seen as a significant development:

• Fertilizers export restrictions removed
• Rare earth metals export curbs lifted
• Tunnel boring machines export restrictions eased

This policy shift could have positive implications for various Indian industries that rely on these imports.

Market Valuation and Focus

Indian markets are showing promise, with a particular focus on domestic-facing sectors. However, investors should note that:

• Largecap valuations are currently trading at a slight premium to long-term averages

As the Indian economy continues to evolve, sectors benefiting from domestic consumption and policy support are likely to be at the forefront of growth in the coming fiscal year.