5 reasons why Indian market is in sweet spot despite Trump tariff

India is among the best economies to invest in, even as the US President Donald Trump slapped the global economies with higher-than-expected reciprocal tariffs, believes some market experts. They suggest that India is at the sweet spot for investments for the global funds, who should pull out their funds and rush to India.

Donald Trump announced reciprocal tariffs on all major economies of the world on April 2, 2025, making it the 'Liberation Day.' In response to the US tariffs, Asian stock bled in the early trade on Thursday, but made a partial recovery as the session progressed.

In an interaction with Business Today Television, Nischal Maheshwari, an independent market expert, said that one should pull out money from the global markets and invest in India. India is a fairly insulated economy, providing a margin of safety for the investors. India remains the top performing economies in terms of GDP projections. 

Echoing the similar tone, Manish Sonthalia, Director and Chief Investment Officer at Emkay Investment Managers said that China has been levied heavier duties than India, which turns it into a golden 'China plus one' opportunity for India to increase its trade with the US. It's a 'buy on dips' for the markets as India's problems are solvable over the period.

"We have a clear advantage over China, Vietnam, Thailand and Indonesia. The US dollar is going to depreciate and the Indian Rupee is set to improve. FIIs have been big sellers and Indian markets offer a plethora of opportunities with high growth. Nothing is worrying India besides valuation, he added while talking with Business Today Television.

The US President Donald Trump imposed a 27 per cent reciprocal tariff on India, while China was hit with 34 per cent. Other Asian economies including Japan, Vietnam, South Korea and Taiwan were slammed with up to 46 per cent tariffs. This move may stoke inflation in the US, hit consumer demand there and drag the economy into recession.   

Maheshwari said that no other major economy has more than 6 per cent real GDP growth like India, whereas huge uncertainties persist in the global markets. On the other hand, the Indian government's stance is clear, compared to other economies. RBI is supporting the economy and businesses with rate cuts and increasing liquidity. Rate cuts in the next policy due in April. 

However, he cautioned that US tariffs are not that negative for the Indian market but one should not jump the gun as it's too early. India is at the front foot post tariff but it's too early to rejoice.

India’s GDP impact will be limited due to its diversified export base and growing domestic manufacturing. The government remains confident in mitigating risks through trade diversification, said Anil Rego, Founder and Fund Manager at Right Horizons.

"India has limited dependence on external demand and provides a degree of insulation. India’s low reliance on goods trade and strong domestic demand help mitigate indirect economic impacts, making it one of the least vulnerable economies. While the tariffs pose short-term challenges, India's economic resilience and trade strategies may help cushion the overall impact, he said.
 

India’s comparatively lower tariffs offer a distinct advantage in attracting FIIs as cost-efficient destination. Lower tariffs directly reduce the cost of doing business, making Indian markets more attractive than high-tariff economies, Akhil Puri, Partner- Financial Advisory at Forvis Mazars (India). 

"In the short term, reduced tariffs can drive higher FII inflows, boosting market sentiment and liquidity. A favorable tariff structure signals a business-friendly climate, leading to immediate foreign capital influx and increased investor confidence.  India’s lower tariffs not only drive short-term investment surge but also lay the foundation for long-term, sustainable growth," he added.
 

A 3,000-point drop on Sensex in the pre-open trade might have raised investor anxiety earlier in the session, but the domestic stock market did not fall much post the initial knee-jerk reaction to the 27 per cent US tariffs.

Amid the trade tariff jitters, Indian stock markets staged a smart recovery on Thursday. BSE Sensex rebounded nearly 690 points from day's low to 76,494 mark, while Nifty50 index recovered more than 160 points from its intraday lows to 23,306.50 during the session.

Despite the near term hit, this is likely to be the start of long drawn negotiations and see scope for some immediate easing of tariffs imposed. A potential India-US trade deal may eventually iron out some of the issues around tariffs and market access on both sides, with India also committing to higher purchases of US crude oil, defence etc, said Nirmal Bang Institutional Equities.

While the Pharma sector was exempted, steel and aluminium spaces did not see levy of any additional duties from the US. Among other export-oriented sectors, Indian IT is likely to be relatively insulated from the impact of tariffs, although concerns over a slowdown in the US economy may weigh on the sector, Nirmal Bang said.

"We are now entering a new world order, and there’s nothing wrong if other countries were having tariff barriers while the US did not, and is now correcting it," said Nitin Rao, CEO at InCred Wealth. 

Markets will have to price this in, both in terms of sentiment and earnings. Volatility would continue but at some point it will result in sharp falls over a few days which may give good buying opportunities in a new economic order for high risk investors, he said.