Emkay: Buy if Trump tariffs cause dip.

The Indian equity market has shown resilience so far during the weekly options expiry session, despite US President Donald Trump escalating the tariff war against India.

Trump announced an additional 25%

tariff on Indian exports as a "penalty" for New Delhi’s continued import of Russian crude oil. This comes on top of the 25% tariffs already imposed on Indian goods on July 20.

However, this may not be a done deal just yet. A 21-day off-ramp period could leave the door open for negotiations. If implemented, the move could bring exports from key sectors, such as textiles, jewelry, and auto ancillaries, to a halt, dealing a blow to India's labour-intensive industries.

Brokerage firm Emkay Global,

however, remains confident in the broader economic outlook and expects a consumption-led recovery in the second half of FY26. The brokerage said it would look through any near-term volatility stemming from this announcement and would consider buying into any substantial market dip of over 5%.

Impact on India

The direct earnings impact on listed companies is likely to be limited. However, a cumulative 50% tariff would make Indian exports to the US virtually unviable, potentially triggering second-order effects on

employment-heavy sectors like textiles and jewelry.

Emkay expects the government to intervene with fiscal support for the affected sectors, including measures to protect banks from a potential spike in non-performing loans (NPLs).

India's reliance on domestic consumption is expected to prevent a sharp growth collapse, though targeted stimulus may be needed to cushion the blow.

In the short term, the announcement could trigger a vicious cycle involving concerns around the current account deficit (CAD), rupee

depreciation, foreign portfolio investor (FPI) outflows, and a correction in equity markets. Emkay believes such a phase would be short-lived.

Sectoral impact

The most exposed sectors include —

Textiles: Gokaldas Exports, Kitex Garments

Chemicals: Camlin Fine Sciences, Aarti Industries, Atul Ltd

Auto Ancillaries: Bharat Forge, Suprajit Engineering, Sona BLW

If India reduces Russian crude imports as part of a settlement, companies like Reliance Industries and oil marketing companies (OMCs) could come under pressure.

Additionally, global crude prices may spike.

Pharma and electronics manufacturing services (EMS) appear to be exempt for now, although a possible announcement by Apple later today could affect EMS sentiment.

Emkay also said that this may not be the final form of the tariffs, and sector- and stock-level impacts could evolve in the coming days.

Investor Outlook: Driving without headlights

Emkay cautioned that investors are currently navigating in the dark. Its key recommendations are:

-

Don't overreact to short-term volatility: Trading this uncertainty is highly risky, with news flow prone to sudden swings.

- Limit exposure to export-oriented sectors: Even if the final trade deal softens, a sharp global slowdown appears likely.

- Buy the dip beyond 5% correction: Valuations would then become attractive, and the direct earnings impact remains negligible. Moreover, India’s cyclical recovery in H2FY26 remains intact, powered by domestic demand.

- No change in sectoral stance:

Overweight: Consumer Discretionary, Industrials
Underweight: Financials, Technology, Staples