'Real Damage To Unfold Gradually, Market Won't React Immediately': Manishi Raychaudhuri On US Tariff Impact

The Trump administration's proposal to impose a 50% tariff on Indian goods has sparked fresh tension, weighing on Indian markets and economy. Manishi Raychaudhuri, CEO of Emmer Capital Partners, warned of long-term consequences for India's growth trajectory and corporate earnings.

“Markets have already had a flavour of sentiment depression that could occur,” Raychaudhuri said, referring to the anticipated impact of the tariff hike. “So this has been well telegraphed. I don’t think the market would react immediately.”

The market veteran cautioned that the real damage may unfold gradually. "With the diminution of India's geo-political clout, there can be second and third order impacts on capex, on investment, and several other products that India is exporting," he explained. "Those things may actually impact corporate revenues and earnings going forward"

Raychaudhuri believes that while markets may adapt over time, investors should brace for continued underperformance. “India has already underperformed quite a bit compared to global emerging markets, and it may continue for some quarters,” he said.

The tariff threat comes amid broader concerns about India’s economic momentum. Raychaudhuri pointed to recent policy moves aimed at stimulating growth, including aggressive rate cuts by the Reserve Bank of India (RBI). “We have seen a jumbo rate cut from RBI,” he noted. “The real policy rate of India is about 4%—it’s almost never been so high except for one or two instances in the past decade.”

He added that the central bank still has “a lot of room to cut rates going forward,” and highlighted fiscal measures as well. “The government in the budget has given direct tax stimulus, and now they are coming with indirect tax stimuli as well.”

Despite these efforts, Raychaudhuri said investors remain cautious. “What investors need to look forward to is the impact on Indian consumption,” he said. “Urban consumption, auto sales, are still headed down.”

He concluded with a note of caution for market participants: “I think investors would want to have a flavour of earnings estimates beginning to move up before committing more capital.”

The proposed tariff hike—doubling duties from 25% to 50%—is part of Washington’s effort to pressure India over its continued purchases of Russian oil, as the U.S. seeks leverage in its stalled negotiations with Moscow over the war in Ukraine.