India is considered the least affected by former U.S. President Trump’s trade policies, according to a report by CLSA. The report highlights India’s resilience and strategic positioning in global markets, leading CLSA to increase India’s overweight rating to 20% compared to China.

New Delhi: India is emerging as one of the least affected markets in the region by former U.S. President Donald Trump’s trade policies, according to a report by global brokerage firm CLSA.

The report attributes this resilience to India’s relatively low trade exposure to the U.S., manageable corporate leverage, and declining levels of foreign equity ownership1.

The report highlighted that India’s resilience is due to its relatively low trade exposure to the U.S., manageable corporate leverage, and declining levels of foreign equity ownership. While other markets might be more vulnerable, India is better positioned to handle such challenges.

“India appears to be one of the least exposed regional markets to Trump’s adverse trade policies. Additionally, as long as energy prices remain stable, India may provide a relative oasis of FX stability in an era of a strengthening US dollar,” the report stated.

The report also reversed its tactical overweight on China while increasing its exposure to a 20% overweight on India. It stated, “We therefore reverse our tactical allocation in early October, returning to a benchmark on China and a 20% overweight on India.”

One of the key factors supporting India’s stability is its ability to maintain relative foreign exchange (FX) stability, particularly if global energy prices remain stable.

Despite a strengthening U.S. dollar, India is viewed as an attractive destination for investors looking to shield themselves from volatile markets elsewhere.

The report also noted that foreign investors have been net sellers in the Indian market since October. However, this hasn’t dampened domestic investor appetite, which remains robust and has helped offset the impact of foreign outflows.

Many foreign investors view this decline as a potential buying opportunity to correct their underexposure to India. While valuations are still somewhat high, they are becoming increasingly attractive to investors.

The report stated, “India has experienced significant net foreign investor selling since October, and the investors we engaged with this year have been specifically waiting for such an opportunity to address their underexposure to the Indian market.”

A potential risk to Indian equities lies in the possibility of an excessive volume of new stock issuances. The cumulative 12-month issuance currently represents 1.5% of the market capitalization, a level historically seen as a threshold that could put pressure on the market.

On the positive side, India stands to gain from the ongoing shift in U.S. investment flows, driven by companies adopting “China plus one” strategies to diversify supply chains beyond China. This trend could significantly strengthen India’s position in global supply chains.

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