The low reciprocal tariff rate allowed Indian stocks to escape this round of global sell-off

Under the heavy blow of Trump's tariffs, the Indian stock market has become the relatively resilient one in this storm. As of Wednesday's deadline for this report, the MSCI India Index has fallen nearly 1.9% this week, expected to outperform the MSCI Asia Pacific Index by over 6 percentage points, marking the largest excess performance since 2009. Why is the Indian stock market relatively less affected by this round of impact? On one hand, Nomura pointed out that India is the least affected by the U.S. tariff impact. In this round of reciprocal tariffs, India is taxed at 26%, significantly lower than competitors like Vietnam at 46% and Cambodia at 49%. Moreover, unlike East Asian export-oriented countries, India's trade structure is primarily based on domestic demand and services, with a relatively low proportion of exports to GDP, thus making India's economy less dependent on the U.S. On the other hand, according to a previous article by Wall Street Insight, Morgan Stanley stated in a research report released on April 2 that the uncertainty of the Indian economy is decreasing, and long-term return potential is opening up. On the macro front, the rupee exchange rate has fully corrected, enhancing export competitiveness. The Reserve Bank of India is leaning dovish, with expectations of starting a rate cut cycle in April, and accommodative policies are likely to continue. The fundamentals of the Indian economy also support this confidence. Regarding corporate earnings, Morgan Stanley believes that the growth of Indian corporate earnings is promising, expecting an annual growth rate of 15%-20% over the next 3-5 years. In terms of stock market valuation, the stock market valuation in gold terms has fallen back to 2020 levels, making it attractive, and several sentiment indicators have entered the strong buy zone, very similar to the bottoms in 2001 and 2008