“While investors are being sold the India story, it is worth recognizing that India will face much more hostility from the rest of the world, as it tries to grow, than China did during the last few decades,” he said.
Damodaran’s comments come as the world, including India, grapples with the new reality of trade uncertainties, mostly driven by US President Donald Trump.
In recent weeks, Trump has announced punishing tariffs against allies and adversaries alike, selectively paused and imposed them, doubled and then halved some, and warned that he will tax European wine and spirits a stratospheric 200%. As far as India is concerned, the threat of reciprocal tariffs looms large, which the President said will kick-in from next month.
“The world that will prevail, if a trade war plays out, will be very different than the one that existed before globalization took off,” Damodaran said.
The trade war fears have sent the global markets into a tailspin. Last week the Nasdaq recorded one of the biggest declines seen in the recent past. The index recovered a bit in the following sessions.In India too, investor sentiment was weighed down by escalating trade tensions, which pose a risk to global economic recovery. Concerns over persistent FII outflows and the potential repercussions of US tariffs on India Inc further dampened market confidence, raising uncertainty over Q4 earnings. FIIs recorded net outflows of Rs 5,729 crore in the cash segment.Analysts say continual policy pivots from the administration on tariffs have left investors uncertain about what is to come and how the economy may be affected.
The broader horizon, going forward, is filled with dark, ominous clouds, driven by some key macro events. The US Fed will announce its decision on interest rates later this week, which will give a hint on the market direction going forward.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
