'If we have a 25% deal in next 10-15 days...: Raamdeo Agrawal on US tariffs and market impact

The ongoing trade discussions between India and the United States may soon result in an agreement, with minimal tariff impact on markets if concluded in the next two months. In an interview with CNBC TV-18, Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services, expressed confidence in the eventual agreement. "There are two big countries, and it is impossible that this will not happen. Deal will happen on what terms, when - that is uncertain," Agrawal stated.

Agrawal highlighted that market uncertainty due to unresolved trade negotiations has led to some selling pressure; however, he advised investors to focus on the long-term earnings impact rather than short-term volatility.

"If we have a 25% deal in the next 10-15 days, I think the market has already calibrated that. It is not like we are the only ones paying the tariffs - the whole world is. They have put a 19-20% tariff even on Pakistan. I think it will be a new world, which will find its own way," Agrawal said.

This perspective aligns with his observation that markets generally dislike uncertainty. He emphasised, "The only way to approach this subject is to figure out at our end what could be the impact on the earnings - will there be a lasting impact, will it be deep, and how big will it be?"

According to Agrawal, the Indian economy's domestic reforms and demand provide a strong foundation, suggesting that any agreement will likely have a limited effect on company earnings. He underlined that "earnings are what is going to drive the markets - nothing else," pointing to fiscal and monetary measures along with tax reforms supporting the economy's growth. These reforms are expected to bolster the economy further, ensuring resilience against external shocks.

The ongoing negotiations may present a buying opportunity for investors holding cash, Agrawal suggested, noting strong domestic institutional inflows and India's robust $4 trillion economy driven predominantly by consumption. This optimism is rooted in the belief that India is well-positioned for growth regardless of external trade shifts. Investors are encouraged to evaluate the current market landscape for potential entry points.

Market experts continue to watch the discussions, noting that any potential agreement is expected to offset adverse tariff impacts. Agrawal's insights suggest that if an agreement is reached soon, the effect on the market could be mitigated, allowing investors to capitalise on any market corrections. Such corrections could provide strategic opportunities for portfolio adjustments.

The potential deal comes at a time when markets are cautiously optimistic, with other financial commentators also expressing similar sentiments about India's economic resilience. Agrawal's views align with this sentiment, highlighting the importance of focusing on the fundamentals of earnings growth. This focus is crucial for navigating the complexities of the global market environment.