"They have been ripping us off", is what US President Trump said about the rest of the world, when he imposed his trade tariffs on April 2. "Our country won't be laughed at anymore."
Trump, a master of grievance and complaint, was talking about the world's richest country, which holds a privileged status in the global finance system - since the US dollar is the international reserve currency.
Over the next few weeks, Trump quickly learned what it meant for the US to be treated like just another country. His tariffs triggered a market meltdown that has threatened the unique status of the US as the investment destination of choice. The dollar fell, and US bonds weakened, increasing the government's borrowing costs. Stocks tanked. Markets only recovered when Trump backed off most of his tariffs - and then fell again last week when he threatened to fire Jerome Powell, the Chair of the Federal Reserve.
Foreign investors own about 30% of American investments, which comes to $19 trillion of US equities, and $7 trillion of Treasuries. With his arbitrary policy decisions -- where he posts his plans on social media, and not even his advisers seem to know what is coming next -- Trump threatens the "safe haven" reputation the US has with foreign investors, which the country spent over half a century nurturing.
That old line - in times of crisis comes opportunity - is valid here. While an unpredictable administration hits US growth (Citigroup Global Economist Robert Sockin expects tariffs could drive US GDP growth to zero this year), investors and companies are in search of alternatives. The IMF now sees China and India contributing a bigger share of global growth, and it has revised the contribution from the US downward.
In this week's Analyticks:
Knock, knock: As trust in US fades, India has an opportunity
Screener: Stocks outperforming the benchmark index, with FIIs buying stakes in Q4FY25
Investors look beyond the US, as the Trump effect grips global markets
In the past three months, US stocks have taken the biggest beating while Indian and Chinese indices rose. The US Mag7, the stars of 2024, plunged.
Meanwhile, FIIs, which had pulled large amounts out of India in recent months, have recently reversed course, buying $2 billion worth of Indian equities in just the past four sessions. This is being driven by investors diversifying their holdings amid US volatility, and Trump favouring India as among the first countries it wants a trade deal with, even as it freezes China out with 145% tariffs.
There are of course, challenges for India in dealing with an unpredictable Trump administration. Still, India shouldn't ignore it when someone knocks so hard on the door of opportunity, even if the person knocking is a bit erratic.
The Indian opportunity amid the trade chaos
India has a lot of catching up to do when it comes to China. China's GDP of $18.5 trillion is 4X India’s, and it has 11% of global trade, to India’s 2.7%.
But China's weakening relationship with the US, and the UK and EU searching for new trading partners as the Trump tariffs kick in, give India a chance to sign multiple deals, and pivot from its domestic market to the world. The potential win from such a strategy shift is huge.
China has long targeted the $100 trillion global economy for growth while India relies on its $4 trillion domestic market. As a result, India's manufacturing exports have been weak, and local private investment has not taken off.
India's anxiety around opening up its economy has hurt it considerably for decades. In 2019, it refused to join the RCEP trade agreement — a free trade agreement that includes China, Japan, South Korea, Singapore and South East Asia — citing concerns about excessive Chinese imports. The Peterson Institute projected at the time, that India’s yearly income would increase by $60 billion — around 1.1 percentage points in real GDP gains by 2030 — if it joined the agreement. It has also dragged its feet on FTAs with UK and Europe, because of its reluctance to lower tariffs on its domestic market.
China's focus on exports has led it to automate its manufacturing plants at high speed, pushing prices even lower. China's new robot powered factories — called 'dark factories' because robots don't need electric lights to work — run 24/7, seven days a week. The focus on world markets has helped China become competitive beyond toys and consumer goods. It has made it hard to beat in cars, chips, and increasingly, AI and robot tech.
The risks India faces in being left behind, have never been higher. The US tariff war is a chance for us to fix old, self-damaging habits. Trump is not incorrect in calling India a "tariff king". Consider the auto sector, a source of his anger. The tariffs India places on imported automobiles go as high as 110%, making most imported vehicles unaffordable to Indians. It is why India imports only 15,000 cars a year, even as it sold 4.3 million passenger vehicles last year.
Our over-focus on protecting our domestic market has kept us excessively uncompetitive, favouring Indian industrialists over Indian consumers. Our tariff wall suggests a paranoia about our ability to compete with the world, even as we constrain our startups and SMEs with tough local rules. A more relaxed approach would allow India to create an environment similar to what drove China's export growth - by giving consumers more choice, manufacturers more import flexibility, and domestic industries more competition.
We need to look beyond our local backyard. Trump has now spotlit India as a potentially major trading partner. We should leverage this opportunity amid the chaos to rapidly sign trade deals with the US, UK and Europe.
Screener: Stocks outperforming the benchmark index, with FIIs buying stakes in Q4FY25
FIIs increase stakes in fertilizers and banking stocks
As the Q4FY25 earnings season gets underway, we take a look at stocks where foreign institutional investors (FIIs) are increasing their holdings. These stocks have strong performance and institutional confidence, despite broader market uncertainty. This screener shows stocks outperforming the Nifty 50 index, where FIIs are buying stakes QoQ in Q4FY25.
The screener shows stocks from the fertilizers, finance, pharmaceuticals, housing finance, and electric utilities industries. Major companies that show up in the screener are Aptus Value Housing Finance India, AWL Agri Business, Coromandel International, Chambal Fertilisers & Chemicals, Vijaya Diagnostic Centre, Poonawalla Fincorp, UPL and Credit Access Grameen.
Aptus Value Housing Finance’s FII holding increased 5.9 percentage points QoQ in Q4FY25. This housing finance company is also up 16.7% over the past quarter. Malabar Investment was the largest buyer of a 6% stake in the firm through its funds, Malabar India Fund and Malabar Select Fund. The Forecaster expects its revenue to grow 22.5% YoY in Q4FY25. The company is set to announce its Q4 results on May 1.
Vijaya Diagnostic Centre also shows up in the screener after FIIs increased their holding by 180 bps QoQ to 19.4% in Q4FY25. The healthcare services provider has risen 8.4% over the past quarter. The most notable buyer of the stock was The Prudential Assurance Company, buying a 1.1% stake. Trendlyne’s Forecaster estimates the company’s revenue to grow by 16.5% YoY in Q4FY25, driven by higher volumes from the radiology and pathology segments.
You can find more screeners here.
