Mumbai, Nov 18: Among the emerging markets (EMs), India has the "least sensitivity" to US President elect Donald Trump’s proposed tariffs and higher interest rates, global brokerage CLSA's chief equity strategist Alexander Redman said on Monday. Redman, who spoke at the ‘27th CITIC CLSA India Forum 2024’ here to discuss the “global outlook and the case for India versus China”, said foreign investors are likely to run out of excuses for not investing further in India.
“If you are considering the world is going to be less friendly to emerging markets and you are ‘underweight’ in India, investors are going to forgive you for increasing weightage in India,” Redman said. CLSA last week raised India's allocation to a 20 per cent 'Overweight', while cutting exposure to China. The global brokerage shifted its "tactical allocation" to India from China, citing growing concerns over Beijing’s economy and investor sentiment after the US presidential election.
According to Redman, he has been disappointed with China on account of the potential headwinds that it faces after Trump returns as US president and the surge in 10-year US yields rising up to 4.5 per cent, the highest since May. India has the "moat" against Trump's proposed economic and trade policies, given the domestic flows and lower exposure to US investments, the chief equity strategist said.
"India is one of the markets where you will be forgiven to have a long-term Overweight exposure," he added. In a recent note, Redman highlighted that among emerging markets, India has the least sensitivity to Trump’s proposed tariffs. "India benefits from relatively low trade exposure to the US, manageable leverage, and a particularly low and declining level of foreign equity ownership," he wrote.
The global brokerage believes “Trump 2.0 heralds a trade war escalation” just as exports become the largest contributor to China's growth and India benefits from an “appreciable moat” should trade hostilities between the US and China heat up again. "India appears as among the least exposed of regional markets to Trump's adverse trade policy. Moreover, so long as energy prices remain stable, India may offer a relative oasis of forex stability in an era of a strengthening US dollar," said the global brokerage.
