Navigating global trade turbulence: Nilesh Shah’s market outlook

Nilesh Shah, in an interview with ET Now, said that the upcoming meetings involving Trump, Putin, and the US delegation visiting India are expected to influence market movements significantly. Currently, the imposition of a 50% tariff by the US is being seen as a form of trade embargo, impacting several Indian industries. These geopolitical developments will be key drivers for market sentiment going forward.

According to Nilesh Shah, the 50% tariff has directly affected sectors such as textiles, chemicals, auto components, and aquaculture. Indian companies in these areas will need to find alternative markets beyond the US to sustain their business. Given India’s trade deficit of over $250 billion, this challenge also presents an opportunity to leverage domestic market access for Indian products.

Nilesh Shah stresses that to navigate this challenging situation, the focus must shift to strengthening the economy, which is the root cause behind market performance. Efforts should include redirecting exports from goods hit by US tariffs to other countries. Additionally, India’s significant spending on travel and education abroad can be leveraged to balance trade. Government initiatives such as income tax cuts, potential GST rationalisation, reductions in fuel prices, the 8th pay commission, and lower interest rates are all aimed at stimulating the domestic economy.

Nilesh Shah emphasises the critical long-term goal of achieving self-reliance, especially in research and development and technology innovation. Currently dependent on global sources for R&D, India must develop a clear roadmap to become Atmanirbhar in these areas. Strengthening the economy through these means will help stabilise markets and attract foreign portfolio investments naturally.

Nilesh Shah shares that earnings growth for FY26 is expected to hover around 7-8%, marking a year of consolidation. The Nifty EPS is projected to be in the range of Rs 1100 to Rs 1125. While some sectors have performed well, others have fallen short of expectations. A revival in earnings may come from monsoon-related consumption and the early festive season, though this remains uncertain at present.

Nilesh Shah notes that the anticipated boost from the festive season may be limited and is likely to impact staples and automobiles the most. Government spending remains at an all-time high, with fiscal prudence maintained. Monetary easing continues, but growth is still below India’s potential. A significant weak spot remains in private investment, which has not yet picked up pace.

Nilesh Shah explains that several factors have held back private investment, including technological disruptions, succession planning issues, and the new generation’s reluctance toward traditional businesses. The government’s announcement of a Rs 1 lakh crore fund for R&D is a positive step that could encourage innovation and boost private sector investment if leveraged well.

Nilesh Shah advises that, given the fast-changing and unpredictable global environment, investors should focus on the fundamentals. This means identifying companies less vulnerable to global headwinds, with reasonable valuations and strong governance. Encouragingly, new entrepreneurs from tier II and III towns are increasingly entering the market, bringing fresh energy and growth potential. Staying long-term focused is essential despite short-term volatility.

Nilesh Shah points out that the domestic consumer discretionary sector is seen as relatively insulated from global tariff impacts. This sector benefits from government measures like tax cuts, reduced EMI burdens, GST rationalisation, fuel price cuts, and the 8th pay commission. Key industries include hotels, tourism, airlines, home improvement, and financial services. The focus remains on domestic-driven stories and bottom-up stock picking.