India ETF Offers Safe Haven After 'Significant Progress' on U.S. Trade Deal

On Tuesday, Asian equities are shaking off the outsized declines on Wall Street from the day before.

It’s an unusual pattern, as I’ve noted during this period of heightened geopolitical tensions, higher trade barriers and large one-day market moves.

Some Asia Pacific markets are resuming trade on Tuesday after a holiday for Easter Monday. That applies to New Zealand, first to start trade and ending the day with a 2.3% decline. But the losses moderated as the day spread across the region, with Australia ending Tuesday flat (technically, a 0.03% decline), and Hong Kong’s Hang Seng index up 0.8% on the day.

All three had been shuttered on Monday. All other Asian markets are trading all week, while Australia and New Zealand close early for the ANZAC remembrance day on Friday.

Other Asian markets are either flat or higher on Tuesday, outside Taiwan, where market heavyweight Taiwan Semiconductor Manufacturing Co. TSM (TW:2330) fell 2.3% and dragged the benchmark down 1.6%. Even TSMC’s move on Tuesday isn’t as severe as the 2.6% drop for its Wall Street ticker. Without that influence, Taiwan would have been higher, too.

'Significant Progress' on Trade Deal

With U.S. Vice President JD Vance in India, it’s notable that Indian equities shook off any bad news from U.S. trade to post gains on Tuesday. Both the Sensex and the Nifty 50 indexes ended up 0.2% today. Both have added exactly 3.5% over the course of the last month.

That makes them outperformers since the initial tariff tantrum. The two indexes are up around 9.0% since that nadir.

I’ve cited Indian stocks as a safe haven defensive play amid this global uncertainty. That call is bolstered by India’s apparent progress in securing favorable terms on a U.S. trade deal.

Indian Prime Minister Narendra Modi issued a statement that he and Vance welcomed the “significant progress” in negotiating a U.S.-India trade deal.

Vance was more restrained, saying he looks forward to working to strengthen the relationship with India. Vance did retweet a Modi post on X, adding that it “was an honor” to meet Modi. 

“He’s a great leader and he was incredibly kind to my family,” the vice president added. 

Vance’s wife, Usha, was born in San Diego to immigrants from the Southeastern Indian state of Andhra Pradesh.

India Worse Off But Better Off?

What form will an India trade deal take? It will likely leave India worse off, but faring better than other nations. So, it’ll be doing well by comparison.

Like Japan, which I discussed in my last column, India has also stolen a head start on other countries by using existing strong U.S. relations to work early and hard on a trade pact.

India has been charging some of the world’s highest tariffs on imports, at a 17% average rate, or 12% when weighted for the volume of trade, per World Trade Organization data. Prior to President Trump’s intervention, the average U.S. tariff was 3.3%, which falls to 2.2% when adjusted for volume.

So when Trump was promising “reciprocal” trade tariffs, economists expected India to suffer worse than almost anywhere else.

However, the massive tariffs calculated by the Trump administration are in fact based on the balance of trade, not anything to do with tariffs. As a result, Indian goods are faced with a 26% U.S. import duty, although India will be hoping to strike a deal within the 90-day period before that goes into effect.

Consumer Insulation

For now, any U.S. company importing Indian goods will be paying a 10% import tax, up from that average 3.3% rate. So that triples the Indian import duty, something U.S. importers must either pass on to consumers or swallow in a way that would eat up the margin on the largely low-cost items shipped into the United States.

It’s the domestic-focused Indian stocks that have fared best as a result. 

“Relatively, India has fared well as it is impacted less from trade-war uncertainties,” Nomura’s India strategists Saion Mukherjee and Amlan Jyoti Das wrote in a note to clients. In fact, India even stands to gain as multinationals diversify their supply chains away from China.

They suggest that the intense selloff among Indian stocks may be over. Investors should likely favor domestic sectors, and companies that benefit from higher consumption and the potential for supply-chain relocation.

Indian stocks are risky for U.S. individual investors to play. So I would recommend an exchange-traded fund (ETF). The Columbia India Consumer ETF INCO should reward investors seeking to benefit from India’s relatively strong economic growth, still forecast to hit around 6.0% this year and even push 7.0% for 2026.

Nomura also just released data indicating that global emerging-market funds decreased their allocation to Hong Kong and China stocks by 0.4 percentage points for March, and also lowered their allocation to India by 0.3 percentage points. But that data all predates the escalation in tariffs.

As I explained last week, I think Hong Kong-listed China stocks, particularly the Seven Tech Titans, are a buy for aggressive investors. And I think India, insulated as it is by its huge home market, is a good defensive play.

Nomura attributed that 60% of EM funds are underweight India to a strong showing from Indian stocks in March, making stock selection harder. With rising valuations resulting in a larger overall position, the average 16.7% allocation to India is second only to Hong Kong/China, the largest position at 29.0% of portfolios.

At the time of publication, McMillan had no positions in any securities mentioned.