No tariff impact likely on markets if India, US trade deal happens in next two months: Raamdeo Agrawal

Raamdeo Agrawal

Indian stock market will likely not see any major impact of US tariffs if a trade deal between both nations is concluded in the next two months, Motilal Oswal Group Chairman Raamdeo Agrawal has said.

"Once the deal is in place, we will start assessing what the impact would be. The trade has its own way," he said during a conversation with CNBC-TV18 on August 28, a day after an additional 25 percent levy on Indian imports came into effect.

The veteran investor said it is not only bilateral trade that impacts the markets, but India's rising economy and government's ‘arsenal of reforms’ can simultaneously boost the market sentiment.

Raamdeo added that it will be earnings that will drive the market, and the impact of tariffs on earnings must be evaluated. "If a deal comes in the next couple of months, then we don’t see any impact on earnings," he added.

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

The market expert said sees nearly Rs 7 lakh crore worth of inflows from domestic institutional investors (DII) in the current year. "There is plenty of buying," he said.

Following subdued earnings in recent quarters, one may see an earnings acceleration on the back of the proposed reforms push, said Raamdeo, adding that this may be a good time to accumulate shares.

Government reforms, including the GST rejig, can have a strong impact on earnings, said the market veteran. "The power of domestic consumption is very strong. India is now a $4 trillion economy, with 60-62% domestic consumption. I think we can unleash it, and I think that's what the government and the PM are talking about. This is a great time to do so. The minor setback created by the US tariffs should help us not only get a good trade deal, but also to boost domestic consumption," Raamdeo Agrawal added.

Also read: Our LIVE blog on stock market updates

While US President Trump's additional 25 percent tariff have effectively taken the levy on Indian exports to US to as high as 50 percent, the equity market has seen a measured reaction, with some sectors managing to buck the selling.

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