Indian equity markets witnessed a sharp decline on Monday, joining a global sell-off triggered by former US President Donald Trump’s sweeping tariff announcements last week. Fears of a renewed trade war, which could destabilise international commerce, have sent shockwaves through global equities. However, analysts at Motilal Oswal Financial Services (MOFSL) believe that India remains relatively shielded from the worst of the fallout — and they’ve identified several stocks that could weather the storm.
In its latest report, MOFSL said that India’s diversified export portfolio, which includes services, pharmaceuticals, chemicals, and electronics, offers some insulation from Trump’s blanket tariff approach. “While certain segments like textiles, metals, and specific agri-exports might take a short-term hit, India’s robust domestic demand and widening non-cyclical export base provide vital buffers,” the brokerage noted.
Domestic demand to the rescue
India’s economic engine is driven primarily by domestic consumption, contributing over 60% to its GDP. Government-backed initiatives such as ‘Make in India’ and the Production-Linked Incentive (PLI) scheme are aiding import substitution and promoting industrial self-reliance. Analysts argue that a continued rise in local manufacturing and capital expenditure is helping India decouple from global volatility to a certain extent.
MOFSL observed encouraging signs of consumption recovery. Urban demand remains resilient in sectors like travel, entertainment, and organised retail, while rural demand is starting to pick up on the back of easing food inflation, improving rural incomes, and ongoing government support schemes.
“Personal loan disbursements and digital transaction volumes are both scaling record highs,” the report noted. “This suggests increasing consumer confidence and aspirational spending patterns, which together bode well for earnings visibility into FY26.”
Investment strategy: Quality over quantity
Against this backdrop, MOFSL is urging investors to remain focused on companies with strong fundamentals, proven growth trajectories, and resilience against external shocks. The brokerage has issued a list of top stock picks, divided into largecap and quality midcap categories, which they believe are well-positioned to thrive despite global headwinds.
Top largecap picks:
- ICICI Bank – Strong earnings visibility and top-tier asset quality make it a preferred name in banking.
- Larsen & Toubro (L&T) – Viewed as a key beneficiary of India’s capex revival and infrastructure-led growth.
- Reliance Industries – Offers diversified growth potential across energy, digital, and consumer sectors.
- Sun Pharma – Considered a defensive play, with stable margins and a robust global product pipeline.
- Bharti Airtel – Continues to enjoy a steady re-rating story, thanks to improving ARPU and 5G monetisation.
Top midcap picks:
- Indian Hotels – Capitalising on India’s booming travel and tourism recovery.
- Dixon Technologies – A standout in electronics manufacturing, boosted by PLI and import substitution.
- BSE Ltd. – Offers high-margin business with unique market positioning in capital markets infrastructure.
- Godrej Properties – Well-placed to benefit from an upcycle in residential real estate across top metro cities.
- HDFC AMC – A structural long-term bet as Indians increasingly shift towards financial assets and mutual funds.
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Sectors to avoid
Despite the optimistic outlook on domestic-led themes, MOFSL is cautious about specific sectors. It maintains an underweight stance on the metals sector, citing weak pricing trends and high cost volatility. The cement sector is also under pressure due to rising input costs and tepid demand, particularly in Tier 2 and Tier 3 cities. Additionally, upstream oil and gas stocks remain unattractive amid regulatory overhangs and stagnant earnings.
The bigger picture
While global equity markets digest the renewed tariff threats and the spectre of recession, India’s relatively insulated economy, domestic consumption strength, and structural policy support may provide a silver lining. For investors willing to look past the noise and adopt a long-term view, domestic-linked stocks could be the key to navigating these uncertain times.
As global headlines continue to jolt market sentiment, MOFSL’s message remains clear: stay local, stay selective, and invest in strength.
