ETMarkets Smart Talk | Check emotions at the door’ – Warren Buffett’s lesson resonates in volatile times: Amar Ambani

Thanks for taking the time out. The month of May started off on a volatile note with the tariff war & now India-Pakistan tensions. What is your take on markets?

A) Just as the 90-day pause on Trump’s tariff plans brought some relief, fresh tensions with Pakistan have reintroduced uncertainty. History suggests such geopolitical flashpoints rarely cause lasting damage to Indian equities – be it Kargil, the Parliament attack, 26/11, or Pulwama.

The post-Uri correction coincided with demonetization, which had a far deeper economic impact. With the market already down ~15% from its peak, some downside is priced in. That said, I expect continued volatility and a rangebound trend over the next 5–6 months.

Relations with Pakistan could worsen, and any escalation may trigger knee-jerk reactions. Compounding this is the absence of strong domestic triggers – earnings remain muted and consumption recovery is still weak.

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For long-term investors, this phase could offer attractive entry points. But broadly, 2025 looks more like a consolidation year than a breakout one.

Q) Why this sudden selloff in the pharma space? There is some chatter after US President Donald Trump signed an executive order to ramp up domestic drug manufacturing.
A) The recent selloff in the pharma space is driven by renewed concerns around US policy. President Trump’s executive order to boost domestic drug manufacturing has added to the overhang, especially following earlier comments on imposing 100% tariffs on imported drugs.While companies like Sun Pharma and Lupin have US plants, majority of Indian pharma’s revenues still come from exports. The executive order also asks the US FDA to fast-track approvals for domestic facilities, potentially giving US-based competitors an edge.

Though a trade deal between the US and India is likely, uncertainty around tariffs and regulatory timelines continues to weigh on sentiment.

On the fundamentals side, Indian pharma’s US revenues have been growing in low single digits since 2022. The acute segment in the domestic market has also been weak for the past two years. Additionally, the recent appreciation of the INR is eroding the currency benefit that had supported earnings.

Q) May has been relatively good for bulls as Nifty closed with gains in 7 out of the last 10 years. With FIIs on a selling spree – will we see ‘sell in May & go away’?
A) FIIs were heavy sellers in prior months, leading to some under-ownership in Indian equities. And there’s been a notable shift recently, with FIIs turning net buyers over the past couple of weeks.

However, a broader return will depend on how the geopolitical situation with Pakistan evolves, global trade clarity and relative valuations.

That said, the macro environment is turning supportive: the INR has stabilised and appreciated, the US dollar is softening, and US bond yields are easing.

Despite near-term volatility, the structural case for Indian equities remains intact. I believe the best phase of FII flows into India still lies ahead.

Q) What is happening with Crude oil? We are seeing some wild swings in commodities. Lower crude oil will help the economy. How do you see the scenario for India?
A) The current crude oil price range of $60-70 per barrel is in line with our house view and appears sustainable. It helps avoid inflationary surprises, however, any incremental benefit may be limited, as the government has already adjusted fuel taxes, keeping retail prices elevated in spite the fall in crude.

India’s oil import bill stood at around $175 billion in FY24 and is expected to remain at similar levels in FY25 and FY26. So, the incremental economic impact from benign oil is likely to be capped from here.

That said, softer crude prices still bring meaningful indirect advantages. They help stabilise the rupee, improve sentiment, and enhance the relative attractiveness of Indian equities for foreign investors.

Q) What is your take on earnings and how the next few quarters are likely to pan out?
A) Revenue growth has been fairly steady at around 7% year-on-year over the past few quarters-excluding Q2, which came in at 4.2%-and we expect Q4 FY25 to follow a similar trend.

The real story this quarter, however, could be on the margin front, where we’re likely to see a positive surprise of around 20 basis points, translating into a profit beat vs estimates.

Looking ahead, with inflation under control, signs of a rural consumption revival, and the base effect kicking in from Q2 FY26, we expect corporate earnings to accelerate. FY26 earnings growth is likely to come in around 12-13%, driven by improved operating leverage and stability in input costs.

Q) It looks like we have entered a sideways market, and money-making might not be that easy. Patience and right stock selection might be the key. Staying on cash just like Buffett is the right strategy?
A) The fact that Warren Buffett raised Berkshire’s cash pile to over $342 billion, an all-time high both in absolute terms and as a percentage of the company’s size, speaks volumes. He’s been early, cautious, and right yet again – it’s like scoring a century in your farewell test match.

That said, for most investors, if you had already raised cash earlier, this is the time to start deploying selectively. For those who didn’t, I wouldn’t recommend panic selling at this stage unless you’re sitting on significantly overvalued positions. Plenty of quality stocks are now available at reasonable valuations and present good entry opportunities.

However, pockets of froth still exist even after the correction, and those should be trimmed. This is truly a stock-picker’s market now, not one where you can rely on the tide to lift all boats.

Q) What is your take on the recent Warren Buffett AGM? Any learnings that you have gathered from the speech/note?
A) It’s always insightful to hear from the master. Sometimes, it’s not about learning something entirely new, but about having timeless principles reinforced in a way that makes you pause and reflect.

Buffett’s words this time really hit home, especially when he said, “People have emotions, but you’ve got to check them at the door when you invest.” That’s a powerful reminder in today’s volatile market.

Another standout line for me was, “We will make our best deals when people are the most pessimistic.” It underscores the value of contrarian thinking and emotional discipline, principles that are easy to understand, but hard to practice consistently.

Buffett’s ability to remain calm, rational, and opportunistic in the face of market noise is what continues to set him apart.

Q) Equity is good but there is some chatter on the Street that bonds might do well in the short term. What are your views? What should be the ideal asset allocation?
A) Personally, I’m 100% into equities – that’s just my preference (smiles). But asset allocation is critical for most investors and should always be tailored to individual factors like age, risk appetite and risk capacity, liquidity needs, and financial goals. There’s no one-size-fits-all formula.

With inflation likely to undershoot the RBI’s 4% target, real rates are reasonably high. At a 6% repo rate, the real rate is over 2%, which opens the door for rate cuts. We could see up to three cuts, bringing the repo rate down to around 5.25%.

In that scenario, bond yields will ease further and the 10-year could drift to below 6%. However, the short end may see more yield compression, especially after the distortions of the past couple of years. That could lead to a steepening of the yield curve.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)