Impact on India remains limited, says Axis Securities on Trump's tariffs; recommends these 15 stocks

Axis Securities believes that the direct impact on India remains limited after US President Donald Trump imposed reciprocal tariffs on its trading partners, including India. "These (Trump's tariffs) measures are expected to introduce considerable volatility in global markets, raising concerns around trade flows, supply chains, and broader economic growth. Despite this development, we believe the direct impact on India remains limited. With higher tariffs being imposed on competing economies, Indian exports are not at a relative disadvantage. However, in the short term, certain sectors may experience pressure on volumes, margins, and overall growth. It will be crucial to monitor any retaliatory actions from affected nations and how bilateral trade agreements evolve in the coming months," the domestic brokerage stated on Thursday.

It expects market volatility to remain elevated in the near term due to the extent of the tariffs, which have surpassed market expectations. "These measures are inherently inflationary and could complicate the US Federal Reserve's monetary policy trajectory. Furthermore, any escalation in trade disruptions may heighten recessionary risks in the US, leading to a broader slowdown in global economic activity. Given the significant influence of the US economy on global financial markets, short-term sentiment is likely to be impacted. However, we see this volatility as an opportunity. We recommend increasing cash allocations by up to 10 per cent and using market dips to systematically build positions in high-quality stocks with strong earnings visibility. A phased investment approach with a 12–18 months horizon remains the most prudent strategy in the current environment," Axis said.

"It is important to highlight that the Pharmaceutical sector remains exempt from these tariffs. Given its defensive nature, we expect a breather rally in this space, making it an attractive area for incremental investments," the broking firm also stated.

On the domestic front, Axis said India's growth trajectory remains intact, with key macroeconomic factors supporting a stronger FY26 compared to FY25. "The RBI's recent policy measures will enhance liquidity in the system. Additionally, consumption-driven measures given in the Union Budget are expected to provide further impetus to domestic demand. These factors collectively set the stage for improved credit growth, higher consumer spending, and a more resilient domestic economy over the next fiscal year. Given this backdrop, we foresee a clear divergence in market positioning. Sectors with significant domestic exposure are likely to outperform, while export-oriented sectors may remain under pressure as global uncertainties unfold. The risk-reward equation currently favours India's domestic-facing industries, making it an ideal time to realign portfolios toward quality domestic opportunities," the brokerage mentioned.

Sector-wise, Axis said large-cap stocks, monopolies and domestically focused businesses stand to benefit the most in the current scenario. "We remain overweight on large private sector banks, telecom, consumption, hospitals, and interest-rate proxies, given their ability to deliver consistent earnings growth amid evolving market conditions. Additionally, after the recent price correction, select capex-driven plays appear attractive due to their long-term domestic growth prospects," it added.

"Conversely, we maintain a downgrade stance on the IT sector as we anticipate continued weakness in discretionary IT spending in the US, a key revenue driver for Indian technology firms. With the introduction of Trump tariffs, the probability of further earnings downgrades has increased, posing downside risks to valuations in the near term. As such, we recommend reducing exposure to the IT sector," Axis further said.

The brokerage shared its 15 top stock picks from different sectors which include names such as HDFC Bank, ICICI Bank, Dalmia Bharat, State Bank of India (SBI), Lupin, Trent Ltd, Hero MotoCorp, Max Healthcare, Indian Hotels, Kalpataru Projects, APL Apollo Tubes, Varun Beverages, Bharti Airtel, Prestige Estates and Cholamandalam Invest and Finance.