Reciprocal Tariff Threat Not as Severe as Feared; Likely to Revert Quickly

While concerns over reciprocal tariffs on India may seem alarming, sectoral nuances indicate that the actual impact could be less severe than perceived. The extent of the effect largely depends on how President Trump approaches tariff imposition. Sectors that appear most vulnerable include Automobiles, Gems & Jewelry, Chemicals, and Pharma, but their risk levels vary significantly based on how tariffs are structured—whether applied broadly across countries or targeted at specific sectors or sub-sectors.

For instance, India’s tariffs on automobiles (100-125%) are substantially higher than those imposed by the US, while auto component tariffs (7.5-10%) are relatively moderate. The actual exposure of the auto sector, therefore, hinges on the specificity of US tariff implementation. A similar pattern is observed across other vulnerable sectors, where varying tariff rates on sub-components and commodity groups complicate the assessment. Given this complexity, it is likely that the US will impose reciprocal tariffs at a broad country level rather than with a sector-specific focus. However, such tariffs could be rolled back within six months due to increasing economic and political pressure.

Zero-for-Zero’ Industrial Tariffs as a Strategic Concession

A significant portion—over 70%—of India’s imports from the US already face tariffs below 5%, challenging the notion that India imposes high tariffs on US goods across the board. A strategic and minimally disruptive concession India could offer is a ‘zero-for-zero’ tariff arrangement on a broad set of industrial goods, similar to those already imported at zero tariffs from Free Trade Agreement (FTA) partners like Japan, South Korea, and ASEAN countries.

Since these goods already enter India duty-free, extending the same benefit to the US would not impact domestic industries while offering a tangible gesture of trade cooperation. However, agricultural commodities should be excluded from such negotiations, as they require separate trade discussions. This approach would allow India to avoid engaging in a full-fledged FTA, where the US might push for difficult compromises on services, patents, and government procurement. Additionally, sectors such as apparel and petroleum products are unlikely to be affected by reciprocal tariffs, as the US already imposes tariffs that match or exceed those levied by India.

Assessing India’s Potential Gains from the Trade War

India saw a tangible benefit from the previous US-China trade war, with exports to the US increasing by $38 billion between 2017 and 2023—one of the largest gains among US import sources. However, China successfully mitigated its losses by rerouting exports through Mexico and Vietnam, maintaining its export dominance.

The scope of the current proposed tariffs is broader than the previous trade war, making the potential impact difficult to predict. With no official reciprocal tariffs announced yet, their precise effects remain uncertain. Nonetheless, considering the scale of Chinese manufacturing, a complete decoupling from the US market seems unlikely. Chinese goods are expected to find alternative trade routes, reducing the direct benefits India might gain from any resulting supply chain shifts.

Money Trends February 2025

Domestic equity markets declined amid ongoing uncertainty surrounding the U.S. President’s plans for reciprocal tariffs, raising concerns about a prolonged trade war and potential inflationary pressures. Investor sentiment was further dampened by the U.S. Federal Reserve’s statement that it is “not in a hurry to lower interest rates” and plans to “pause rate cuts to evaluate further progress in inflation.”

RBI Monetary Policy February 2025

The Reserve Bank of India (RBI) reduced policy rates by 25bps, a decision unanimously supported by all Monetary Policy Committee (MPC) members, while maintaining a neutral policy stance, also backed by the committee. FY26 GDP growth is projected at 6.7%, with CPI inflation estimated at 4.2%. The RBI highlighted rising global risks leading to capital outflows and a weakening USD-INR exchange rate. Future policy actions will be data-driven to balance inflation and growth dynamics, with liquidity conditions managed to ensure adequate system liquidity.

Key Takeaways from RBI’s Statement:

The MPC acknowledged that inflation has moderated, supported by a favourable food inflation outlook and the continued transmission of past monetary policy actions. Headline inflation is expected to ease further in FY26. However, growth has slowed significantly compared to the previous year’s trend. These dynamics provide room for the MPC to focus on stimulating growth while ensuring inflation remains aligned with the target. Consequently, the MPC decided to lower the policy repo rate by 25bps to 6.25% while maintaining a neutral stance to retain flexibility in responding to evolving macroeconomic conditions.

Growth and Inflation Outlook:

FY26 Growth Estimated at 6.7%

The first advanced estimate places FY25 growth at 6.4%, driven by a recovery in private consumption. Growth is being supported by the service sector and improvements in agriculture, while sluggish industrial growth remains a drag. Looking ahead, strong rabi forecasts and an anticipated industrial rebound should strengthen economic expansion in FY26. Household spending is expected to remain robust, aided by income tax relief in the Union Budget. Fixed investment is set to pick up, supported by higher capacity utilization, strong corporate and financial sector balance sheets, and continued government-led capital expenditure.

However, risks remain, including geopolitical tensions, protectionist trade policies, fluctuations in global commodity prices, and financial market uncertainties. Given these factors, FY26 real GDP growth is projected at 6.7%, with quarterly estimates as follows:

  • Q1: 6.7%
  • Q2: 7.0%
  • Q3: 6.5%
  • Q4: 6.5%

Global Economy Remains Stable

While global growth remains below its historical average, high-frequency data suggests resilience, supported by continued expansion in global trade. Key risks include geopolitical uncertainties, slower disinflation, and policy unpredictability. Additionally, a strong US dollar continues to pressure emerging market currencies, increasing financial market volatility.

FY26 Inflation Expected at 4.2%

The inflation trajectory will depend on several factors:

  1. Food Inflation: Expected to soften, provided there are no supply-side shocks, supported by good kharif production, easing vegetable prices in winter, and positive rabi crop prospects.
  2. Core Inflation: Expected to remain moderate.
  3. Global Uncertainty: Continued financial market volatility and fluctuations in energy prices remain concerns.
  4. Weather Risks: Adverse climatic events pose upside risks to inflation.

Taking these factors into account, the CPI estimate for FY25 is maintained at 4.8%, with Q4 revised to 4.4% (-10bps). The FY26 CPI projection stands at 4.2%, with quarterly estimates as follows:

  • Q1: 4.5%
  • Q2: 4.0%
  • Q3: 3.8%
  • Q4: 4.2%

Liquidity and Financial Market Measures:

  • Forward Contracts in Government Securities: This initiative will help long-term investors, such as insurance funds, manage interest rate risk across cycles and enable efficient pricing of bond-backed derivatives.
  • Expanded Access to the RBI Electronic Trading Platform: SEBI-registered non-bank brokers will now be allowed to participate in secondary market transactions for government securities.
  • Market Trading and Settlement Review: The RBI will conduct a comprehensive review of trading and settlement timings for financial markets under its regulation.

System Liquidity in Deficit:

Liquidity turned negative in December and January, driven by factors such as advance tax payments, capital outflows, forex operations, and a notable increase in currency circulation. India’s foreign exchange reserves have eased from record highs, standing at $631 billion as of January 31, 2025.

Cybersecurity and Payment Systems:

  • New ‘bank.in’ Domain: A dedicated domain for Indian banks aims to enhance cybersecurity and trust in digital banking and payment services. A ‘fin.in’ domain is also planned for non-bank entities in the future.
  • Additional Factor of Authentication (AFA) for Online International Transactions: Strengthening security for international card-not-present (online) transactions by implementing AFA for added protection.

Our Analysis:

The repo rate cut and RBI’s commentary align with expectations. The new governor emphasized the importance of the existing flexible inflation-targeting framework while signaling potential refinements in line with evolving data and conditions. His first policy statement suggests continuity with the previous regime and regulatory approach.

We anticipate that future rate cuts will remain data-dependent, influenced by inflation trends, global developments, asset prices, and domestic growth. Liquidity support measures are a structural positive for the economy. Our FY26 GVA estimate aligns with RBI’s projection, while our inflation outlook is slightly higher.

Money Trends January 2025


Domestic equity markets fell during the month on uncertainty over the U.S. trade policies under the new U.S. President’s regime.

The U.S. President gave a mixed set of signals, as he delayed tariff plans on Chinese goods but threatened to impose tariffs on Canada and Mexico. Losses were extended on concerns over a weakening rupee, rising crude oil prices and continued outflows by the foreign institutional investors from domestic equity markets.

However, losses were restricted as sentiment was boosted after the RBI announced several measures to inject over Rs. 1 lakh crore liquidity into the banking system. Investors reacted positively to the Economic Survey 2025 tabled in the Parliament on Jan 31, 2025, that pegged GDP growth between 6.3% to 6.8% for FY26.

Union Budget 2025-26

The 2025-2026 Union Budget presents a comprehensive plan aimed at revitalizing the economy, empowering the middle class, and fostering inclusive growth. As stakeholders in India’s economic development, it is imperative that we align our strategies to leverage these opportunities and contribute to the nation’s progress.

Money Trends December 2024


Domestic equity markets rose initially on expectations of policy easing by the RBI following the weaker-than expected GDP figure in the second quarter of FY25 of domestic economy. Meanwhile, the RBI monetary policy committee In its Dec2024 policy meeting kept repo rate unchanged at 6.5%for the eleventh consecutive time but reduced the cash reserve ratio by 50bps to 4.0% to boost liquidity.

Wealth Creation in a Dynamic Financial Landscape

In today’s dynamic and ever-changing financial landscape, wealth creation requires a combination of sound principles, innovative strategies, and the ability to adapt to new opportunities.

As global markets evolve, investors are increasingly focused on sophisticated investment approaches that enhance returns while minimizing risks. Among the best global practices for wealth creation are diversified investment portfolios, sustainable investing, the adoption of financial technology, and financial literacy. A deeper understanding of modern financial theories, such as the efficient frontier and modern portfolio theory (MPT), also plays a crucial role in guiding investment decisions and optimizing returns.

Diversified Investment Portfolios

One of the fundamental strategies for wealth creation in the current financial environment is portfolio diversification. Investors are advised to spread their investments across a range of asset classes, including stocks, bonds, commodities, and real estate. This strategy helps mitigate risks associated with market volatility and enables investors to capitalize on different sectors and regions.

In today’s globalized economy, investing in alternative assets like private equity and venture capital has become a key aspect of diversification. The key is to look for post-tax yield. Fixed income yields extremely poor post-tax returns, whereas investments via alternate funds may yield better post-tax returns, but they come with their own embedded risks.

Incorporating digital assets such as cryptocurrencies is also becoming increasingly common, though these present higher risks. Nevertheless, with a diversified portfolio, the potential for high returns from one asset class can offset potential losses in others.

Sustainable and Impact Investing

Sustainable investing, also known as Environmental, Social, and Governance (ESG) investing, has gained significant momentum in recent years. Wealthy individuals and institutional investors are increasingly focused on aligning their portfolios with ethical and sustainable principles. ESG factors are integrated into investment decisions, allowing investors to target not only financial returns but also a positive impact on society and the environment.

This approach includes investments in green energy, social enterprises, and companies that prioritize diversity and responsible governance practices. Impact investing, which aims to generate both financial and social/environmental returns, is also gaining ground. Investors are more willing to accept lower financial returns if it means creating a positive societal or environmental impact. This shift aligns with the growing awareness of global challenges such as climate change, poverty, and inequality.

Wealth creation is not just about finding profitable investments; it also involves effective management and long-term planning. Financial literacy is critical for understanding complex investment options, managing risk, and making informed decisions. High-net-worth individuals often work with financial advisors to implement comprehensive wealth strategies, which may include tax optimization, estate planning, and risk management.

Efficient Frontier and Modern Portfolio Theory (MPT)

A key component in wealth creation strategies is the application of Modern Portfolio Theory (MPT), developed by Harry Markowitz in the 1950s. MPT focuses on maximizing returns for a given level of risk by creating a well-diversified portfolio. It emphasizes that investors should not focus on the performance of individual assets but rather the performance of the entire portfolio.

A core concept of MPT is the efficient frontier, a graphical representation of the optimal portfolios that provide the highest expected return for a given level of risk. At Growthfiniti Wealth, we have been ardent adopters of these concepts. Portfolios that lie along the efficient frontier are considered optimal because they offer the best return for the amount of risk taken. Any portfolio that lies below the efficient frontier is suboptimal, as it fails to provide adequate returns for the level of risk.

Investors using MPT and the efficient frontier concept aim to balance risk and reward by allocating their assets in such a way that maximizes their returns while minimizing unnecessary risk. For example, adding assets with low correlation to each other (such as stocks and bonds) can help reduce volatility and improve overall portfolio performance.

Conclusion

In a rapidly changing global financial landscape, wealth creation requires a multifaceted approach that blends traditional investment strategies with new, innovative concepts. By diversifying their portfolios, embracing sustainable and impact investing, adopting fintech, and understanding modern financial theories like MPT and the efficient frontier, investors can position themselves to navigate the complexities of the financial world.

Through diligent planning and strategic decision-making, individuals and institutions can maximize their wealth while minimizing risk in an ever-evolving global market.

This article has been featured on BSE Broker’s Forum’s January 2025 issue. Click here to access the full magazine.

Disclaimer: Growthfiniti Wealth Pvt Ltd is an AMFI Registered Distributor (ARN168766). Investments in all securities is subject to market risk, please read all offer documents carefully. CRN: U65990MH2019PTC334051

Market Outlook for 2025

India’s growth story remains intact, powered by structural reforms, expanding global competitiveness, and robust economic resilience. Explore key insights and strategies to navigate the year ahead.

The US Federal Reserve’s December 2024 Policy Update: Implications and Risks

In its December 2024 policy review, the US Federal Reserve substantially revised its inflation projections for calendar year 2025. The Personal Consumption Expenditure (PCE) inflation forecast was raised by 40 basis points (bps) to 2.5%, reflecting the recent elevated inflationary pressures and the anticipated effects of Donald Trump’s proposed tariff policies. Furthermore, the Federal Reserve’s updated dot plot signaled fewer rate cuts in 2025, reducing expectations from three cuts to two. The median projection for the Federal Funds Rate for CY25 now stands at 3.9%, reflecting an upward revision of 40 bps.

The implications for India could include a delay in interest rate cuts. This is due to the lowest interest rate spread over the US in recent history and the inflationary risks posed by Trump’s tariff policies. Even with an expected moderation in food prices, overall inflation in India may remain elevated, supported by a resurgence in growth in H2 FY25. The latter could be driven by the tapering of election-related uncertainties, weather-related disruptions, and the positive impact of a 50-bps CRR cut by the Reserve Bank of India (RBI). A strong flash Purchasing Managers’ Index (PMI) reading for December 2024 at 60.7 suggests that the growth recovery in H2 FY25 has already begun.

US Fed Maintains Optimistic Growth Outlook Amid Rising Risks

Despite the evolving challenges, the Federal Reserve remains optimistic about the US growth trajectory, reflected in an upward revision of the GDP growth forecast for CY25 by 10 bps to 2.1%. However, the Fed’s policy statement was notably silent on critical risks posed by rising twin deficits.

  • Current Account Deficit (CAD): The CAD surged to 4.2% of GDP in Q3 2024.
  • Fiscal Deficit: The fiscal deficit climbed to $1.8 trillion (6.4% of GDP) in 2024.

Additionally, while the labor market continues to exhibit a gradual cooling, with the unemployment rate edging up to 4.2%, these structural imbalances pose longer-term concerns.

Key Risks to the US Economy

Several risks threaten the US economic outlook in 2025, including:

  1. Rising Twin Deficits:
    • The widening CAD (4.2% of GDP) and fiscal deficit (6.4% of GDP) are compounding inflationary pressures and reducing fiscal maneuverability.
  2. Inflation and Policy Uncertainty:
    • Revised inflation projections and the potential inflationary impact of Trump’s tariff and mass deportation policies add to macroeconomic risks. The effects of these policies on growth and the labor market remain uncertain.
  3. Federal Budget Cuts:
    • Recommendations from the D.O.G.E. committee to reduce federal spending could adversely impact GDP growth and federal employment prospects in 2025.
  4. Narrow Growth Margin:
    • While the US economy benefits from a slowing yet stable growth outlook, the risks of policy missteps are rising, leaving “very little margin for error.”

These factors collectively underscore the precarious balancing act for US policymakers, with potential spillover effects for global economies, including India. The interplay between growth, inflation, and fiscal dynamics will be critical to watch in the year ahead.

Key points from the press conference:

– Future decisions will be made on a meeting-by-meeting basis, relying on incoming data.

– The initial 50bps cut reflects confidence that inflation is trending toward 2%, though this does not suggest similarly aggressive rate actions will continue.

– The labour market will be closely monitored, as the current cut aims to maintain its strength.

– No recession indicators are evident at this time.

Changes in economic forecasts compared to June’s projections:

– GDP: Growth for 2024 was lowered to 2.1% (-10bps), with 2025 and 2026 growth unchanged at 2%, and 2027 growth projected at 2%.

– Unemployment rate: Revised higher to 4.4% (+40bps) in 2024, 4.4% (+20bps) in 2025, and 4.3% (+20bps) in 2026. The 2027 rate is projected at 4.2%.

– PCE inflation: Lowered to 2.3% (-30bps) for 2024, 2.1% (-20bps) for 2025, with the 2026 forecast unchanged at 2% and 2027 also at 2%.

– Core PCE inflation: Reduced to 2.6% (-20bps) for 2024, 2.2% (-10bps) for 2025, remaining at 2% for 2026 and 2027.

– Federal funds rate: Expected to decline to 4.4% (-70bps) in 2024, 3.4% (-70bps) in 2025, and 2.9% in both 2026 (-20bps) and 2027.

Need personalized guidance? Contact our team of experts today to chart a path toward financial resilience and growth or reach us at ma*******@gr**********.com.

Disclaimer: Growthfiniti Wealth Pvt Ltd is an AMFI Registered Distributor (ARN168766). Investments in all securities is subject to market risk, please read all offer documents carefully. CRN: U65990MH2019PTC334051

Tailored Investing: Mutual Funds vs PMS for Your Financial Goals

When it comes to growing your wealth, one size doesn’t fit all. Your financial journey is unique, and so are the investment options available to help you achieve your goals. At Growthfiniti Wealth, we understand that choosing between Mutual Funds (MFs) and Portfolio Management Services (PMS) can feel overwhelming, especially when you’re not sure which is the better fit for your needs.

Let’s simplify this for you.

The Common Pain Points

  1. “I don’t know where to start.”
    • With so many options, taking the first step can feel overwhelming.
  2. “I’m afraid of losing money.”
    • Market ups and downs can make investing seem risky without proper guidance.
  3. “I’m too busy to manage my investments.”
    • Finding time to handle investments is tough when life is already packed with responsibilities.

The good news? Both MFs and PMS can be excellent options, depending on what you need. Here’s a clear comparison to help you decide.

What Are Mutual Funds (MFs)?

Mutual Funds collect money from many investors and use it to create a mix of investments like stocks and bonds. A professional manager handles all the decisions, making it an easy and straightforward option for most people.

Why Choose Mutual Funds?

– Lower Entry Point: You can start investing small amounts via SIP (Systematic Investment Plans).

– Diversification: Your money is spread across various assets, reducing risk.

– Ease of Access: Mutual Funds are easy to buy, sell, or switch, and their performance is transparent.

– Regulation: They are closely monitored by SEBI, ensuring investor safety.

What Is Portfolio Management Services (PMS)?

PMS provides customized investment plans designed to meet your financial goals and match your risk preferences. Unlike MFs, PMS lets you directly own the assets in your portfolio, with a dedicated manager handling everything.

Why Choose PMS?

– Customized Strategies: Each portfolio is uniquely designed to align with your financial objectives.

– Transparency: You have direct visibility into the stocks or assets you own.

– Active Management: Portfolio managers actively adjust your investments to maximize returns.

– Higher Growth Potential: PMS can deliver superior returns for those willing to take calculated risks.

Key differences MFs vs PMs

How to Decide?

Ask yourself these key questions:

1. What is my investment budget?

   – If you’re just starting out or have a limited amount to invest, MFs are a great way to begin.

   – If you have significant capital and want a bespoke solution, PMS is worth considering.

2. What is my risk tolerance?

   – MFs are generally less risky due to diversification.

   – PMS is ideal for those who can handle higher risk for potentially higher returns.

3. What are the tax implications for my investments?

  • MFs are taxed only when you redeem your investments and realize capital gains.
  • In PMS, clients must pay advance tax whenever there is a sale of securities during the year.

Why Growthfiniti Wealth?

At Growthfiniti Wealth, we don’t believe in cookie-cutter solutions. Whether it’s Mutual Funds or PMS, we work with you to identify the right investment strategies based on your unique financial aspirations. Our team simplifies the process, guiding you every step of the way, so you can invest with confidence.

Still unsure about which option is best for you? Let’s talk or reach out to us today to discover how we can help you make informed investment decisions and grow your wealth, your way.

Disclaimer: Growthfiniti Wealth Pvt Ltd is an AMFI Registered Distributor (ARN168766). Investments in all securities is subject to market risk, please read all offer documents carefully. CRN: U65990MH2019PTC334051