As US President Donald Trump imposed reciprocal tariffs, Ajay Bagga advises Indian investors to exercise caution and focus on domestic macroeconomic factors and consumption.
"I think caution, and focus back on domestic macro, domestic consumption are the place to hide," he emphasised.
Globally, smart money is moving towards safer assets like gold, Japanese yen, and Swiss francs, Bagga noted.
However, Indian investors may not have the same options, according to him. "Indian investors can't do all that so go and buy some gold and wait this out. It will take two-three months," he suggested.
In conversation with NDTV Profit, the market expert, along with macro and geopolitical expert Marko Papic from BCA Research, weighed in on the impact of Trump's tariffs on the stock market. Their insights provide a cautionary perspective for Indian investors amid the ongoing economic turbulence.
"The tariffs are worse than the worst-case scenario. Rather than America first, it is America alone, and they are very irrational numbers that have been put out," Bagga said.
The subjective nature of the tariff calculations, which include factors like currency manipulation and trade deficits, makes them difficult to justify, he noted.
Papic criticised the methodology behind the tariff calculations. "Not only is the algorithm to calculate this tariff 6th grade maths, it appears that for each and every country, they took the nation's trade deficit with the US and simply divided it with the exports to the US."
Such high tariffs could lead to countries walking away from negotiations, posing a significant risk, he warned.
Potential global economic pain will have unintended consequences for the world. We should compete on a fair basis and not on tariffs, Bagga said.
He underscored the impact on major brands like Adidas and Nike, which cannot survive with the tariffs imposed on Vietnam. "The consumer will pull back, the revenues will fall, you already have a huge fiscal deficit."
Papic predicted political repercussions. "President Trump must recognise that approval ratings will fall to the mid-30s within weeks. There will be constraints on many Republicans which will impact the numbers in the US Congress."
"Right now is not the time to be brave and do bottom fishing. Stay on the sidelines for now," Bagga advised.
Economic pain needs to hit home for the Republican voter before any significant changes occur. A 20% drop in the stock market might be necessary to prompt action, he said.
Indian investors are encouraged to focus on domestic opportunities and consider safer investments like gold, while waiting out the current economic uncertainty.
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