Trump tariffs: With key sectors insulated, mutual funds stay bullish on India’s growth story

India’s mutual fund managers remain largely unshaken by President Donald Trump’s renewed tariff push, even as global markets react with caution. With key export-heavy sectors like IT and pharmaceuticals remaining outside the tariff line, fund managers see little reason to reshuffle portfolios.

“The bulk of India’s export market capitalisation comes from IT and pharma, and both remain largely insulated from tariff action,” said Soman H. Udasi, Fund Manager at Tata Mutual Fund. “Allocations here continue to be stock-specific rather than policy-driven.”

Dikshit Mittal, Senior Fund Manager at LIC Mutual Fund, noted that their underweight stance on IT is due to slowing global tech spending, not tariffs. “In pharma, the preference is shifting toward domestic-oriented and specialty product companies, which offer better visibility than US generics,” he added.

Even sectors like metals, which are typically sensitive to global trade dynamics, appear resilient. “With tariffs largely aimed at Chinese exports, India’s exposure to the US market is minimal,” said Devender Singhal, EVP and Fund Manager at Kotak Mahindra MF. “Any demand revival in China could support Indian metal producers in the medium term.”

Fund managers acknowledged some pressure on labour-intensive sectors like textiles and leather, but noted that these represent only a small portion of the listed market. “The market has basically immuned itself from the noise over the last three months,” said Udasi. “If this had been on IT or pharma, it would have been different.”

Mittal emphasized that the US lacks the labour base to fully replace Indian suppliers in low-cost sectors, making a return to status quo likely. He also noted India’s measured approach of avoiding retaliatory tariffs keeps room open for negotiation.

Far from turning defensive, fund managers say they are staying fully invested, with only minor liquidity buffers of 2-5% for tactical shifts. Their focus remains on earnings visibility and India’s domestic growth narrative.

Valuation-wise, Udasi sees the market just “5-6% above long-term averages.” Mittal added that equities remain attractive compared to bonds, though investors may need to temper return expectations. Singhal struck a cautious note on mid- and small-caps, pointing to stretched valuations but highlighting earnings growth as a buffer.

Fund houses advise selectivity in mid- and small-cap exposure due to higher volatility.

For many, the real investment story is unfolding within India. Udasi sees the current cycle as “Make in India 2.0,” driven by new capacity expansions in auto ancillaries, defence, agrochemicals, and specialty chemicals.

Singhal is betting on domestic consumption, citing tax cuts, GST rationalisation, and softer interest rates. “Autos, home improvement, personal care, and discretionary categories like QSRs are all expected to benefit from a pickup in demand,” he said.

While tariff concerns linger globally, India’s fund managers are doubling down on domestic drivers — confident that resilience lies not in reacting to trade wars, but in building a self-reliant economy.