Tariff worries fade, consumption revival seen as next big theme: Amit Khurana

The recent nervousness in equity markets over tariff hikes seems to be fading, with investors taking comfort in expectations that the long-term impact on growth will be limited.

Market experts say attention is now shifting towards GST rate rationalisation and its potential to boost domestic consumption.

Speaking to ET Now, Amit Khurana highlighted that the tariff escalation—initially seen as a negative surprise with a 25% plus 25% hike—has not triggered a significant market sell-off. “The market is assuming the second 25% hike will not sustain and that governments will eventually find common ground. The bigger concern remains whether the first 25% stays or softens to the 18–19% range, which is more in line with global peers,” he explained.

Khurana pointed out that the immediate impact of tariffs on export data may not surface until October–November, given that many firms frontloaded shipments and built inventories ahead of the hike. “In the interim, markets are drawing confidence from GST rationalisation, softer inflation, and the RBI’s growth-supportive stance. Together, these factors are expected to lift growth momentum in the second half of the year,” he added.

On sectoral opportunities, Khurana cautioned that valuations in several consumption-driven stocks remain expensive, despite recent underperformance. “Some of these names were trading at 65–70 times earnings and are now at 50–55 times, which is still not cheap. But the context is that consumption has underperformed for three consecutive years—first due to high inflation and the Russia-Ukraine war, then a weak monsoon, and finally the election overhang. That underperformance will not vanish in just a couple of quarters,” he said.

According to him, this sets the stage for a broader structural recovery in consumption. “Government policies are clearly geared towards reviving demand, not just for this festive season but over the next few years. If this plays out, we see significant opportunities across consumer staples, durables, building materials, and even pseudo-consumption plays. The caveat, of course, is that raw material inflation must remain under control,” Khurana noted.

While near-term valuations may look stretched, analysts believe the consumption revival theme could emerge as a powerful driver of growth and earnings over the next four to six quarters.

For investors, the key may lie in looking beyond short-term festive season expectations and focusing instead on the longer arc of India’s demand story.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)