'Domestic-focused businesses can shield portfolio from uncertainty'

India's domestic-focused businesses will feel relatively less pain of the US reciprocal tariffs and it would pay to stay invested in businesses oriented toward local markets, according to a top fund manager of Kotak Mahindra Asset Management Company Ltd.

- Ram Sahgal

The tariffs have raised uncertainty, which the market doesn't like, said Harsha Upadhyaya, president & chief investment officer at the fund house. "One way of insulating investor portfolios amid this rising uncertainty is by investing in domestic-facing businesses."

His fund's portfolios are 85% tilted toward such companies, and prefers large banks and are slightly underweight on IT.

Edited excerpts:

Reciprocal tariffs have upended markets. Your take?

That global growth will slow down and inflation moving up appear to be a reality now. When you look at the impact, obviously anybody who is exporting to the US will have an impact.

The relative impact on India could be lower compared to some of the other countries, which are competing with us for increasing export share. However, the point is when costs go up for a consumer or business, then there is going to be either deferment of demand or destruction of that demand and that's what we need to worry about.

If you look at the listed space, it is dominated by domestic businesses in India. So, to a large extent, the impact will be a lot lesser compared to what you would otherwise see if all the exporters were listed. Within the listed space also, there are a couple of large US-oriented exporters.

Say IT services are not impacted as of now, but second-order effects can queer the pitch. However, growth may slow down for export-oriented tech companies if companies in the US started feeling the pinch of tariffs. However, from a pure tariff barrier perspective, there is nothing that's happening to the IT services. With other exporters, too, relative advantage will come into play.