'US Tariffs Largely Immaterial To India's GDP, But Weighs On...': Mark Matthews Warning For Indian Market

US tariffs are largely immaterial to India's GDP, as trade with US accounts for just 2% of India's GDP, according to Mark Matthews, head of research Asia at Julius Baer. "On the surface it is not a big deal, however it weighs on sentiments, which can impact investments and flows into the country," Matthews told NDTV Profit. He also warned that the US dollar may continue for two months

"So, I think that is the reason why the market has been reacting poorly," he said. On Trump's India tariffs, Matthews highlighted that US Officials are going to visit India in the last week of August. "Trump has a pattern in how deals are made. The final deal usually isn’t as bad as it is announced in the first round."

"It's just the uncertainty in between that can cause the market to go down," he said. Matthews highlighted that US Jobs data released on Friday suggests that labour market is in deep trouble. "With illegal immigrants exiting US, that explains downward revision of payrolls," he added.

Matthews noted that, Donald Trump really wants the war in Ukraine to end, and he thinks that he can do so by deterring other countries form buying Russian energy. "After China and Turkey, India is the biggest buyer of Russian crude oil. Hence, Trump is threatening unspecified action on India if it doesn't stop buying the Russian crude oil," he added.

As per media reports, Indian government has not given any guideline to oil refineries to stop buying Russian crude. Matthews highlighted that India won't face much issues, if they stop buying Russian crude oil. "There is a lot of oil around the world, there is no scarcity of it, India will easily find another option," he added.

Matthews noted that the dollar rally can continue for a month or two. "Our view is that the dollar should go down, broadly by 5-7% over the next 12 months. That will be a good thing for emerging markets like India," he added.

On Nifty's performance he told NDTV Profit, "I highly doubt that there would be anything similar to 1995, but the markets will be similar to 2022, where you have a big recovery in the Nifty after a five-week decline."

Matthews highlighted that IT sector- hurt the most in July - will see the most upside if there is any improvement in the relations between US and India. "Currently, everyone wants to invest in sure cash flows like FMCG, cement or banks," he said.