Do it yourself

I returned to my desk after a 10-day Diwali break. As I opened my overflowing mailbox, I realized a lot might have changed in the meantime. Nifty50 is flirting with its all-time level. INR has regained some of its lost ground. Precious metal prices have cooled after a sharp upmove. There is a conspicuous thaw in the Indo-US and Sino-US relations. Prime Minister Modi, who hardly missed an opportunity to represent India at various global forums, has missed the ASEAN summit after missing the UNGA annual session, arguably to avoid a one-on-one meeting with President Trump. However, what caught my attention was a large number of notes, reports, messages alluding to the unsustainable $38trn US government debt, and how the US government and the US Federal Reserve are conspiring to dissipate this mountain of debt by manipulating the prices of gold and cryptocurrencies (especially Bitcoins). Most messages are arguing that 2026 could be a 1933 and/or 1971 redux, when USD was devalued 69% (1933...

  The India specific actions of President Trump in the past six months have evoked a varied response from various stakeholders. ·           The policymakers have been quite guarded in their response. Prime Minister Modi has rhetorically emphasized on the need to be self-reliant and adopt  Swadeshi  (Made in India products), but so far, we have not heard any specific policy or plan to counter the US aggression. Most of the concerned ministers and bureaucrats have repeatedly expressed hope that India will manage to finalize an “honorable” trade deal before the end of 2025. The only detail they have shared is that India shall not compromise on the interests of its farmers’ and energy security concerns.  Prima facie , the bureaucratic and diplomatic effort is to  “restore status quo ante” , to the extent possible. ·           Industry associations also seem to be preferring a...

The Indo-US relations have never been linear and secular like Indo-Russia (Indo-Soviet) relations. Moreover, the Indo-US relations have mostly been transactional and opportunistic; with very little connect on cultural and social level. Both countries have based their strategies on their respective abilities to exploit the available opportunities. In the past three decades, India has significantly gained from the shortages of highly skilled human resources in the US. We have also shared the gains (with other emerging economies) from the US strategy of relocating their manufacturing processes. The US has benefitted from selling technology, energy and defense equipment to India. Besides, India has been an attractive high growth potential opportunity for US capital. Evidently, the US administration now seeks to redefine this transactional relationship. The present strife in the Indo-US relations may therefore sustain much longer than what most of us would have expected a couple of mont...

The US administration has imposed a 25% penal tariff on the goods imported from India, with few exceptions. The reason cited for this penal action is continued import of crude oil from Russia by the Indian refiners, despite the US administration insistence that sales proceeds from such oil sales are being used to finance the Russian war on Ukraine. These tariffs are over and above the MFN tariffs prevalent prior to 7th August 2025, and 25% reciprocal imposed with effect from 07th August. Considering the exemption for several items that are critical for the US supply chains, e.g., mobile phones, certain metal items, pharma, semiconductors, energy etc., the effective tariff rates on Indian exports to the US are estimated to be ~33%. India has termed this penal action “unfair, unjustified, unreasonable”. The public stance of the Indian government is that buying Russian oil is critical for our energy security, and it is our prerogative to decide from where to buy.  Considering the curr...

2025 is proving to be an interesting year for traders in the Indian stocks. The traders have faced multiple challenges in the past eight months; and had some good opportunities to make extraordinary profit. More notably— What made traders’ life tough ·          The external environment has been volatile. Geopolitical conflicts in the Middle East had escalated materially. The war between Russia and Ukraine continued and developed a new trade/tariff angle for the Indian economy. India engaged with Pakistan in a small but intense war that could have serious long-term repercussions for regional geopolitics. These events caused sharp volatility in the market, causing exacerbated margin calls and losses to the traders. ·          The US imposed reciprocal (25%) and penal (25%) tariffs on imports of merchandise from India, making Indian exports to the US significantly uncompetitive in comparison to the tradit...

  …continuing from yesterday . In my view, assimilating the impact of a sustained Indo-US trade standoff in a personal investment strategy is an extremely complicated task, for three reasons – (i) Indo-US relations are very deep and wide; (ii) Indo-US trade relations go much beyond import and export of goods and service; (iii) Indo-US trade relations are intricately intertwined with strategic, geopolitical and social relations. Hence, the impact of a prolonged standoff in the trade relations may not be confined merely to a couple of thousand Indian exporters, having a material exposure to US markets. In my view, a noticeable impact could be felt at economic, political, geopolitical, and financial levels. As of this morning, we do not know about the progress in back-channel negotiations. But visibly both the sides appear to have hardened their stance. India has outrightly rejected the reasons cited by the US administration for imposing penal tariffs, viz., purchase of crude oi...

…continuing from yesterday. To assess the impact of the latest changes in tariffs on the Indian exports to the US, on investment strategy and make suitable changes to minimize the adverse impact on investment portfolios, it is important to understand the dimensions of the Indo-US trade, its elasticity to tariffs, and sustainability of tariffs on various merchandise. Given the southward sloping trajectory of the Indo-US strategic relations since 2018, it may also be relevant to speculate a worst-case scenario; and find ways to assimilate that into investment strategy. Dimensions of Indo-US trade (Important note: The figures given in the following discussions have been taken from various sources, including the WTO, US trade department and India’s department of commerce. At various places these are reported either for calendar year or financial year. In some cases, these are provisional numbers. There could be some mismatch in terms of CIF and FoB reporting. Besides, I have rounded ...

The US administration has announced imposition of 50% additional tariffs (25% reciprocal and 25% penal), over and above the regular/MFN tariffs that were already in place, on merchandise imports from India. Certain items, like pharmaceuticals, that are part of separate trade negotiations, and services are presently not part of the new tariff rates and continue to be charged at the extant rates. This level of tariff is indubitably concerning, as it makes numerous Indian MSME businesses, especially those exporting textile, leather goods, small components, jewelry, carpets etc., incompetitive; and in many cases poses an existential threat to the exporting entities. For several MSME the US market contributes a substantial part of their revenue; and these entities were enjoying some advantage over competitors due to lower MFN tariffs. They not only lose this advantage, but become materially incompetitive due to these tariffs. These reciprocal and penal tariffs, in my view, tantamount to...