Trump Tariffs on India: Analysts believe that India's relatively stronger macroeconomic fundamentals than those of its emerging market peers, such as China, will allow it to withstand Donald Trump's reciprocal tariffs. They suggested that foreign institutional investors (FIIs) might reconsider investing in Indian markets in light of this.
"Lower-than-expected tariffs (for India) have relieved pressure on most investors. This development is a welcome surprise, especially when combined with other positive factors such as valuations, growth outlook, and macroeconomic stability — all of which point to a favorable investment environment," said Nirav Karkera, head of research at Fisdom. He added that the tariff news is likely to be well received by both domestic and foreign portfolio investors, particularly in export-oriented sectors that are more vulnerable to tariff-related risks.
Notably, Foreign Institutional Investors (FIIs) became net buyers in the week ending March 28, 2025, snapping a 16-week outflow streak that was the longest in 25 years. This resulted in net purchases of ₹2,014.18 crore in Indian equities for the month, marking the first time since October 2024. The record selling of $1.3 billion in the domestic equity market has reduced India's market capitalization by ₹75 trillion from its peak, resulting in relatively low valuations at present.
Furthermore, only about 15% of Nifty50 companies have significant goods export business. The rest of the companies are primarily driven by domestic business. Analysts believe that India will prioritize domestic demand, develop import substitutes (such as mobile production), and consolidate services exports, which will help the economy mitigate the overall impact of trade wars in the medium term and attract investor money.
"With the world's largest population, India is in a strong position to drive economic growth through domestic demand. The Indian government also expects that the value of the country's service exports will soon exceed that of its goods exports. With a strong inflow of foreign capital (particularly FDIs), a robust inflow of NRI remittances, and a strong base of service exports, India is better positioned to overcome this setback and continue to grow its economy and equity wealth in the medium to long term," G Chokkalingam, Founder and Chief Research Officer at Equinomics Research.
"With the world's largest population, India is in a strong position to drive economic growth through domestic demand. The Indian government also expects that the value of the country's service exports will soon exceed that of its goods exports. With a strong inflow of foreign capital (particularly FDIs), a robust inflow of NRI remittances, and a strong base of service exports, India is better positioned to overcome this setback and continue to grow its economy and equity wealth in the medium to long term," he further added.
Analysts believe that relatively low tariffs, combined with India's minimal reliance on exports, could keep the country insulated from any major shock to economic growth, boosting investment sentiment. "Compared to China, where exports contribute around 20% of the economy, Indian exports contribute about 10% of the total GDP. The US accounts for 18% of total exports. As a result, the impact of these reciprocal tariffs should be manageable," highlights G Chokkalingam.
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