Sandip Sabharwal on why reciprocal tariff announcements may have little impact on India

Sandip Sabharwal, asksandipsabharwal.com, says auto is not a tariff story at all. A lot of panic was created by many analysts, with regards to what numbers will come in from most of the auto companies in March.

The numbers which are coming till now including those of Eicher Motors, TVS, Ashok Leyland have been much above what the analysts are expecting.Sabharwal also says that the companies which are doing well, will continue to do well. Many of the large banks like Axis, ICICI, HDFC.



Kotak will benefit as IndusInd slows down growth and tries to adjust its balance sheet. This is the penultimate day before we expect an announcement on reciprocal tariffs. How should one gauge this news event and how should one position themselves, especially when it comes to the Indian markets?Sandip Sabharwal: Hopefully this will be the liberation day from all the tariff talks and markets will focus on fundamentals from there on.

I would not be so worried. India's external linkages are limited in terms of our goods exports to the US are pretty limited, so there will be limited sectoral impact even if significant tariffs are put up. We need to see the exact contours of everything, but this news flow may not have any long-lasting impact on Indian equities.

If the tariff wars escalate, overall the risk assessment or risk in the overall markets goes up, and so to that extent, the valuations which investors are willing to ascribe to in the risky assets like equities would come down. That is a whole global risk which exists but from the Indian perspective, the risk is limited. What is your take on the auto pack because this is about auto sales, but these are getting hit with what's likely to happen when you talk about the tariff front.

Set aside that news flow, how should one play this theme and should one play this theme at all?Sandip Sabharwal: I am not sure how auto gets hit by the tariff theme because Indian exports of autos to the US are limited and the potential of US exports to India of autos also remains limited. So, I do not think it is a tariff story at all. A lot of panic was getting created by many analysts, with regards to what numbers will come in from most of the auto companies in March.

Like you rightly said, the numbers which are coming till now which include those of Eicher Motors, TVS, Ashok Leyland, whichever companies have reported till now, have been much above what the analysts are expecting and autos tend to directly gain as the interest rate cycle moves down and liquidity improves. So, I would not be negative on autos, autos are reasonably well-placed. Does Vodafone Idea still remain just a trade stock or is it still an avoid for you?Sandip Sabharwal: It will remain an avoid because it will never make a profit.

So, if it never makes a profit, then the value for equity shareholders has to be zero. Should the market fall further and maybe undo the rebound that we have seen since last month? Would the buying list remain the same or will there be a new set of names that you would be looking at?Sandip Sabharwal: Nothing much has changed. The companies which are doing well, will continue to do well.

Many of the large banks also will benefit like Axis, ICICI, HDFC. Kotak will benefit as IndusInd slows down growth and tries to adjust its balance sheet. There is nothing negative per se for these.

Many of these banks are foreign investor flow dependent in terms of short-term moves because the financials are the highest weighted in most indices. So, foreign investor inflows and outflows tend to impact them in the short run, but in the longer run, they look good. L&T has been winning very significant orders, and that looks well-placed.

Some of the companies like M&M, Bharti Airtel fundamentals remain strong. A lot of largecaps are reasonably valued and should do well. What does it mean for the realty plays and especially the likes of Oberoi Realty or Lodha which have large dominance in the Maharashtra market?Sandip Sabharwal: The increase in rates is not so significant.

It is in line with inflation. I do not think that should be a big factor. The sector is correcting overall because there is an expectation that growth could slow down and pricing growth has already stalled, and that is possibly playing on the real estate stock and could play out for the rest of the year also.

IT still remains an avoid or do you think one can bottom fish now?Sandip Sabharwal: Largely an avoid because if the US economy slows down, which it should, then the entire discretionary spending uptake story also gets moderated. All of us know the news flow of how AI is taking over some low-level coding, etc. So, the business model is under some threat.

The good part is that these companies still have significant cash flow generation, they will still do buybacks, etc. But at some stage, the correction will end. So, let us wait and see the commentary post results which most of the companies will report in two weeks from now and we will have more clarity.

But definitely the pickup which had just started, should start moderating. What is your take on Avenue Supermarts versus the Q-Comm space, Zomato for instance amidst reports that they have let go of 600 employees from their customer support team amid the slowdown that they are seeing in food delivery. How would you stack up traditional retail versus Q-Comm?Sandip Sabharwal: Traditional retail has many companies.

So, on one side, your companies would fall into V-Mart or companies like Aditya Birla Retail and Fashion, Trent, etc, in different segments. In Avenue Supermarts versus the quick commerce, actually there is no comparison per se because Avenue Supermarts is profit making, those guys are still making losses and will increase their losses. But Avenue Supermarts is a standalone.

The stock still trades at 80 times earnings. Earning growth should average 8% to 10% over the next few years. It is very highly valued.

I do not think it should trade at such valuations..