How do you stay sane amidst all the uncertainty around the tariff news flow, especially concerning India?Manishi Raychaudhuri: It’s a difficult situation. India has been facing declining earnings estimates coupled with relatively expensive valuations, which have been dragging the market down over the past month. The market peaked around late June, and this earnings season has been underwhelming. It’s been mixed—some top-tier banks have performed reasonably well, but IT services and several consumer companies have issued warnings about weakening demand.
So, a relatively cautious backdrop was already in place when the tariff issue emerged. That has now become a major sentiment driver, and its first impact is already being seen in the currency market. Watch how the rupee performs over the next few days. This will also impact capital flows. India lost a little over $2 billion in July, while other Asian markets like Taiwan and Korea actually saw strong inflows—Taiwan gained around $7 billion, and Korea over $3 billion. So, India has been disproportionately affected in a short period of time.
We’ll need to watch key upcoming dates—like August 25, when negotiations resume with the United States. Whether a truce is reached in the next couple of days remains to be seen. We’ll likely have to wait until Q4 this year to see if earnings estimates bottom out and begin to recover. Until then, investors must brace for continued uncertainty and volatility.
You mentioned a slight underperformance ahead. What do you see as the bigger concern—external pressures like tariffs or internal factors such as weaker FII flows and the underwhelming earnings season?Manishi Raychaudhuri: It’s primarily the domestic issues that are weighing on India. The weak earnings season and, more importantly, the consistent downgrades in earnings estimates highlight the problem. If you look across sectors, consensus EPS estimates have been declining since September last year. That’s a full year of downgrades, which is quite rare for India.Foreign investors are paying attention to this. The outflows we saw in July are a symptom, not the cause—they reflect a relatively weak earnings environment. That fundamental issue must be resolved before we can expect a revival in flows and overall sentiment.So, what’s your takeaway from the earnings season? Where would you go overweight or underweight? Or would you rather stay put?Manishi Raychaudhuri: Looking at the macro backdrop, certain factors could eventually support consumption—such as monetary easing by the central bank, more disposable income for urban taxpayers, and higher government wages. Government-led infrastructure investment has already picked up and could eventually spur private sector capex. In fact, some sectors are already showing a year-on-year increase in private capex.
Given that, I would favor private sector banks, which are relatively cheaper on a growth-adjusted basis compared to other sectors. I’d also look at select industrials and consumer discretionary stocks that could benefit from a rebound in consumption sentiment later this year. The infrastructure and defence sectors, given the ongoing capex, are worth considering.
Additionally, I like domestic healthcare services—especially hospitals and diagnostics—not so much pharmaceuticals, which might remain volatile. I’d also keep an eye on high dividend yield plays. While they are limited in India, they’re quite popular across Asia, and the few that do exist here can be attractive to both retail and institutional investors.
Private banks are one of your preferred bets right now. Could you elaborate on what’s driving your positive view? Is it about valuations, or something else?Manishi Raychaudhuri: If you look at the recent earnings, some large private banks—like HDFC Bank and ICICI Bank—have delivered reasonably strong results. Over the long term, private banks are steadily gaining market share from public sector banks, a trend that’s been playing out for 25–30 years and remains intact.
Private sector banks also have much stronger technological capabilities, which support this market share shift. Additionally, they maintain better asset quality. While they may trade at a premium to public sector banks, if investors are selective—especially avoiding banks with asset quality concerns in consumer lending—it’s quite possible to find solid opportunities. That’s how we’re approaching the sector.
