MUMBAI, April 3 (Reuters) - Indian equity markets are better placed than their Asian counterparts to ride out the impact of sweeping tariffs rolled out by U.S. President Donald Trump, according to strategists at JP Morgan Private Bank and Morgan Stanley.
The U.S. tariff on India is nearly half of that on China and significantly less than that on Vietnam.
India's share of exports to the U.S. is lower than its regional peers, at 2% of GDP, and economists peg the impact of tariff hikes on GDP growth at a modest 0.3 percentage points to 0.5 percentage points.
"India seems better positioned relative to most Asian equities following the tariff announcements," said Hong Kong-based Alex Wolf, who heads Asia investment strategy at J.P. Morgan Private Bank.
The headline tariff rate for India is lower than expected and the country's equity markets are more sensitive to the domestic economy, which is expected to find support from accommodative monetary policy, Wolf said in a note on Thursday.
In February, the Indian government slashed income tax for individuals and the Reserve Bank of India kicked off its rate cut cycle.
The RBI also infused cash into the banking system and is expected to cut rates again next week.
Prospects of a recovery in economic growth, alongside limited exposure to tariff risk and a U.S. slowdown have made Indian stocks a favoured bet for Morgan Stanley research.
The brokerage reiterated its overweight recommendation on India after the tariffs were announced and has previously said it finds valuation of Indian stocks attractive versus emerging market peers.
The Indian central bank projects growth momentum to pick up in the April-to-June quarter while inflation is expected to average 4.2% in the fiscal year that started April 1.
While valuations of Indian stocks had stretched following a surge last year, they have since eased as the benchmark Nifty 50 index fell as much as 16% from record-high levels in September before recouping some losses in March.
On the day, the relatively lower tariffs were helping Indian shares outperform regional peers.
The Nifty was down about 0.2% while Vietnamese stocks fell more than 6% and Hong Kong's benchmark Hang Seng Index was down 1.5%.
Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala
Source: Reuters