Speaking to ET Now, Sinha said it would be “myopic” to judge market reaction in the short term as the tariff negotiations between India and the US will be a long-drawn process. “Even after negotiations, we are looking at tariffs of 20–25% compared to an average of 3% prior to the Trump regime. This will have a lasting impact on corporate earnings,” he noted.
While warning of “fragmentation and protectionism” impacting trade and capital flows, Sinha maintained that investors should align with structural domestic themes. “We need to be very careful, but within consumption, autos, e-commerce, and renewables, opportunities are emerging despite global headwinds,” he said.
Slowdown in corporate growth
Corporate topline growth for non-financial companies has already slowed to 3.8–3.9% in the first quarter, with sectors like consumer goods, autos, and engineering witnessing deceleration. “Excluding BFSI, most sectors have delivered negative returns over the past year. Profit growth, which averaged 20% till 2024, has now slipped to 5% in recent quarters. The trajectory ahead looks modest,” Sinha cautioned.
He highlighted that while the government is trying to counterbalance the shocks through GST reforms, rate cuts, and consumption-linked incentives, fiscal constraints could limit infrastructure spending. “Capital goods have already corrected by 12–13% over the past year, and with contracting tax revenues, government capex may take a backseat,” he said.
With around Rs 1,60,000 crore in tax revenue shared between state and central governments, a GST reduction could impede government spending, slowing infrastructure funding that has been stable for the last six to seven years. As tax revenues decline, GST collections are also expected to fall, limiting the government’s capacity for significant capital expenditure on infrastructure and likely slowing industries reliant on government spending.
Sectoral Outlook
On the sectoral outlook, Sinha pointed towards domestic consumption plays as the biggest beneficiaries. “Autos, consumer sectors, and to some extent pharma, which remains exempt from tariffs, will gain from GST reductions and household-focused measures. Investors are already rotating from BFSI into consumption-driven sectors,” he explained.He also identified renewable energy, e-commerce, and auto ancillaries as promising opportunities. “The solar energy space is seeing aggressive activity. E-commerce could benefit from a consumption boost, while auto ancillaries stand to gain from lower tax rates. Post-March 2026, with the expiry of the compensation cess, autos in particular may get further relief,” Sinha added.
