Tariffs Galore, D-Street Jittery, And IPOs In A League Of Their Own — Talking Point This Week

Donald Trump did multiple things this week, which is what he has done almost every week of his tenure this far. From approving the TikTok deal through executive order to announcing significant tariffs on Thursday, to saying that Ukraine can win back all of its territory taken by Russia and that NATO should down Russian jets breaching their airspace, the US President was the chief newsmaker. European diplomats followed suit, with them apparently said to have warned the Kremlin this week that NATO is ready to respond to further violations of its airspace with full force—including by shooting down Russian planes.

Fed Chair Jerome Powell's comments also grabbed headlines, especially since after cutting rates, he mentioned that near-term risks to inflation are tilted to the upside and risks to employment to the downside, which is a challenging situation and that two-sided risks mean that there is no risk-free path.

Meanwhile, the Indian IPO markets were zooming, with issues getting subscribed strongly – with companies like Seshaasai Tech and Solarworld Energy getting subscribed over 65x, even in a week where markets got clobbered and trends got broken.

Here are the key talking points this week:

Tariff Concerns Galore

Trump announced significant tariff increases overnight, impacting various industries. Starting Oct. 1, a 100% tariff will be imposed on branded and patented pharmaceutical drugs unless companies are building manufacturing plants in the US. Additional tariffs include 50% on kitchen cabinets and bathroom vanities, 30% on upholstered furniture, and 25% on heavy trucks. This move may significantly affect India's pharmaceutical exports, given the country's substantial reliance on the US market, with America accounting for 31% of India's pharmaceutical exports. And while the messaging is that the tariffs are on patented drugs and not on generics, the street is worried about the lack of clarity. And it showed in the over 5% gash for most mainstream pharmaceutical names on Friday.

Market Concerns Despite Upgrades

The Indian stock market faced a challenging week, marked by uncertainty over the easing of India-US relations, particularly with looming trade tensions and potential tariffs. While valuation multiples remain reasonable—neither overly expensive nor cheap—the market's mood has turned cautious, with a tendency to punish stocks swiftly before thorough analysis. Sudden losses this week have made traders hesitant, leading to reluctance in taking large trading positions immediately. It showed, with the Sensex and Nifty 50 indices plummeting over 2% apiece, respectively. There were sustained foreign investor outflows and weakening of the rupee against the US dollar. The BSE smallcap gauge dropped 2.4%, while the midcap index declined 2.13%. Most sectors faced significant pressure, with realty, energy, and metals being the hardest hit. Foreign institutional investors offloaded well over Rs 17,000 crore in the cash segment. This happened despite HSBC upgrading Indian markets to 'overweight', citing favourable government policies and light positioning of FIIs.

Multiple Concerns For Tech

IT stocks were in focus recently, with Accenture posting decent Q4 results, including a 7% year-over-year revenue growth and an 8.1% quarter-over-quarter increase in overall bookings. However, Infosys and Wipro's American Depositary Receipts dropped nearly 3% on the NYSE. The decline may be attributed to FY26 guidance being a dampener, despite strong performances in BFSI and Gen-AI bookings. Additionally, positive US macro data, including lower weekly jobless claims and an upward revision of US GDP in the second quarter, likely contributed to the weakness, as the trajectory of rate cuts would be in question post the data. The real issue came over the weekend, with the H1-B visas being slapped with higher costs, and that having an impact on onshoring costs for IT businesses. Remember, some of the Indian IT outsourcing companies depend heavily on the H1-B visas for the current crop of their onshore workers.

As we wrap, here's an eye opening statistic about the Turkish assets. I am sure you know that Turkish bonds and currency have depreciated. But did you know the extent of the depreciation? Well, in the middle of 2021, with elections coming, the Turkish government ordered the central bank of Turkey to print money aggressively, an order which the central bank duly obeyed. Since then, the Turkish lira has depreciated from TRY8 to the US dollar to TRY41. Cash deposits have lost 75% of their purchasing power. And a 10-year government bond has lost 96%!

Have a great Navratri weekend everyone – dance the worries away. I will be at the Falguni Pathak Navratri in Mumbai on Friday and at the United Garba in Baroda on Saturday. May you have a stress-free weekend too!