Inflation, tariffs, US investment drive may keep FII money away

India remains largely insulated from pharma tariffs and HIB visa restrictions, said Seemant Shukla, CEO of Quantum AMC.

- Srushti Vaidya

In an interview with Mint, he said that the bigger risk would be if IT services exports faced tariffs. However, the government is mitigating shocks with tax cuts, goods and services tax (GST) reductions, and liquidity support, Shukla added.

Edited excerpts:

India’s pharma exports are primarily into generic drugs, which are currently outside the ambit of the tariff order. Generic drugs see high price erosion as they come once the innovator drug’s patent expires. Even if one were to assume a similar tariff could eventually come to generic drugs, its pricing would continue to be competitive. India has a few CDMO players (contract manufacturers) who cater to US-based innovator pharma companies across the life cycle, including commercial manufacturing. If innovator pharma companies are forced to put up plants in the US, future drug pipelines for such companies could be impacted.

For FIIs, each market is like a stock. They will enter and exit one if the valuations favour this. For example, China, a year ago, was trading at an 11x multiple; FIIs entered China, and now the country is trading at a 13x multiple. Things have not been very optimistic for India, especially when the markets have given neutral returns in the last year on the back of single-digit earnings.

The good part is that India has decent resilience in terms of domestic money. The recent GST cut is putting more money in people’s hands so subdued growth is coming back at a decent level.