India Positioned For Global Trade Upside Amid Tariff Volatility: BlackRock Investment's Vivek Paul

India has a unique opportunity in an environment of global dislocation, from an economic perspective, because it can play a role with both the US and China and really insert itself more centrally into the global system, according to Vivek Paul, FIA, Managing Director, global head of portfolio research and UK Chief Investment Strategist for the BlackRock Investment Institute.

In a recent interview with NDTV Profit, Paul highlighted the shifting dynamics of global trade, particularly following the implementation of new US trade tariffs.

"It's just in April that we have had a material shift in the narrative in terms of global trade dynamics. The volatility is shaping flows," he said.

These shifts, he suggested, are now impacting capital allocation strategies, with India emerging as a strategic beneficiary.

Indian Equities See A Reversal Trend

Paul noted that foreign investor sentiment toward Indian equities had seen a reversal in recent months. "For several years, materials had an inflow in Indian equities from foreign investors, which really started to change sometime in the middle of last year, and all the way through the first quarter," he explained.

"It's really interesting, that if you look at the period of flows post April 2nd, the investment has become positive again."

Paul believes India stands out in both respects. "This is an environment where we are going to end up with greater tariffs globally than we have seen in the past. There is an enormous type of potential that comes within that," he said.

India Favoured Over China

From a portfolio strategy perspective, BlackRock initially entered 2024 with an 'Asian preference,' favouring China in the short term but India in the longer term. However, this stance has since evolved.

"Now, in the more recent period, we have softened that China preference—that's now neutral—given the particular impact to the trade dynamic," Paul said. "We continue to retain the longer-term opportunity for India."

Paul pointed to growing signs of multinational manufacturers choosing India as a strategic supply hub, and Chinese exporters working through Indian intermediaries to access the US market, as evidence of these shifts materialising.

India-US Trade Deal

India's geopolitical positioning and trade policy prospects also offer tailwinds. “With US officials saying that they are anticipating progress in terms of trade talks with India to be accelerated rather than international peers, the Indian economy is relatively more resilient to this situation,” Paul observed. “Structurally, from a geo-political perspective, it's relatively an easier deal to be done with India, as per the US officials.”

Paul concluded that India's geopolitical positioning and resilience make it a compelling choice for global investors. “When building long-run portfolios for international investors, we would indeed focus on greater allocation in Indian large-cap equities,” he affirmed.