Experts believe sectors catering to the domestic customer are likely to outperform those dependent on exports in the wake of Trump's tariff offensive
While Trump’s tariff strategy remains caught up in a web of uncertainty as the US President goes back-and-forth on his decisions to impose reciprocal taxes on trade partners, one thing is for sure. The impact of these reciprocal tariffs would be felt across the globe, causing a disruption in the global economy.
With such a scenario unfolding in the background, India will also feel the heat of a global slowdown, potentially causing a drag on the domestic rate of growth. With the backdrop set straight, experts are now placing their bets on domestic-focused sectors and companies, driven by hopes that these would be better placed to sail through the global slowdown due to their focus on the local consumer.
Analysts at Axis Securities see a favourable risk-reward in domestic-facing sectors, largely due to the minimal impact from reciprocal tariffs within the local economy. Another glimmer of hope can be seen in select large-cap names. “We believe that in large-cap stocks, ‘quality’ stocks, monopolies, market leaders in their respective domains and domestically focused sectors and stocks may outperform the market in the near-term,” Axis Securities wrote.
Echoing similar sentiments, analysts at PL Capital forecast domestic oriented sectors to outperform global oriented segments given that global volatility and tariff wars are likely to impact near term growth.
Key tailwinds supporting these expectations include anticipated rate cuts by the Reserve Bank of India, which would enhance system liquidity, cooling inflation, a likely pickup in government spending after a muted FY25, a favourable low base effect, expectations of a normal monsoon, and India’s potential to outperform amid a global economic slowdown.
“We expect India’s economic growth to rebound from its cyclical slowdown and maintain a lead over major global peers in 2025. A revival in rural demand and urban consumption supported by a sizable income tax cut of approximately 0.3% of GDP announced in the FY26 Union Budget is likely to drive GDP growth,” Kotak Securities wrote in a note.
Neeraj Chadawar, head of research at Axis Securities believes these pointers hint at better days ahead in FY26, with improved credit growth and overall consumption improvements.
Furthermore, Kotak Securities also expects a continuation of key government policy initiatives such as increased public capital expenditure, ongoing structural reforms, and targeted incentives to boost manufacturing and infrastructure to further strengthen India’s medium-term growth outlook.
Kotak Securities sees favourable valuations for banks and NBFCs. Aside from those, the brokerage also views consumer durables, automobiles, agro-chemical, and fertilizer names in positive light, amid expectations of a boost in sales with a good monsoon season.
Meanwhile, Chadawar chose to take an ‘overweight’ stance on large-cap private banks, telecom, consumption, hospitals, and interest-rate proxie sectors. In addition, he also feels capex-oriented plays also offer strong growth visibility in the domestic market for FY26, especially after the recent price correction which has made these stocks look attractive at current levels.
As for PL Capital, the brokerage expects the cement sector to show better growth and profitability led by revival of construction activity and expected price hikes. Much like Kotak Securities, PL Capital also places its bet on travel, hospitals, telecom and pharma stocks, which seem well placed for sustained growth in coming quarters.