While foreign investors may have been pulling out, domestic buyers are keeping the market on a solid footing. Agrawal pointed out that domestic institutions pumped in nearly ₹1 lakh crore in August alone—a record figure that has helped offset the outflows and kept sentiment from sliding too far.
He also sees a mix of hope and hesitation playing out as key policy moves take shape. The upcoming GST Council meeting, for instance, could be a game-changer. Cuts from 28% to 18% on items like motorcycles and entry-level cars could lift demand meaningfully, but markets are still in wait-and-watch mode.
That said, the ongoing tariff uncertainty—especially around India-US negotiations—is muddying the waters. Agrawal believes investor sentiment is being clouded by this short-term noise, even as longer-term fundamentals and reforms continue to strengthen in the background.
These are edited excerpts of the interview.Q: Is the market currently under-pricing the positives that we have seen in the last 2-3 weeks GST cuts, GDP, build up ahead of festive season is the market under-pricing it because it’s in a bit of a negative sentiment state of mind or is it in the wait and watch approach?
A: Just see the pace at which the foreigners are selling for whatever reason and domestics are countering that. If it was not for the domestic flow, you imagine what would have been shape of the market? If you sell a billion dollar in a day, cash, market cannot absorb that. But just that, we have a much bigger flow from domestic, last month was a record. In August domestic institutional investors (DII) itself has bought almost a lakh crore – at least that is what the SEBI number is saying that ₹95,000-96,000 crores have been bought. It’s a recording itself that in one month we have bought a lakh crore cash.
There are two biggest force – one, the sustained domestic flow and participation, the GDP is rising and that is my main presentation today. India, the multi trillion-dollar opportunity. So, if you go through the presentation, the GDP is growing, savings are growing and on top of it participation is growing. This combination is just exclusive in terms of demand for the paper in the economy.
Now, just because there is a demand for paper, stock markets are not going to go up. It is going to go up when the economy does well and when the earnings start climbing, which is what we expect in the second half of the year, or particularly the next year, we are going to see bumper increase in the earnings by maybe 15%,17-18% depending on the slew of reforms which are implemented.
Q: There is so much right on the table, so many moving parts. But would you imagine the crux at the end of the day for investors, the bottom line is going to be to find which are the companies where there is a little bit of predictability and sustenance of earnings growth, decent earnings growth, in these volatile times. Do you think that’s going to be the ultimate aim at the conference?
A: Warren Buffett said that uncertainty is the best friend of the long-term investor. Right now, we are in the midst of uncertainty and where now you need a very clear thinking about how to invest and this uncertainty leads to lot of mispricing of very good stocks, because there could be some very short-term challenge of two, three months, four months, people might come and dump it and you might be able to get it for at 30, 40, 50% cheaper. So, what is important at this venture is to really have a deep thinking and have a very clear strategy on what kind of stocks you like, and are they available now at your prices. It is quite possible those companies are available at a depressed price. This is a great time for the investors, I don’t know how good it is for the traders, but definitely great time for investors for stock picking.
Q: The GST Council is meeting this week, and it could be a landmark session with several items potentially moving to 5% and others from 28% down to 18%. After the initial market rally following the 15th August speech, momentum seems to have cooled. Do you think these GST cuts will eventually trigger a bigger market move during the festive season, or is the market worried about other factors? With strong GDP numbers also coming in, why does the market appear to be muted?
A: This tariff issue is all over. If you see even the PM’s visit everything is coloured, this visit is also coloured with the tariff issue with the America and all. So, there is too much of right now noise, not so much intelligent argument, but there’s lot of noise about this issue, and everything is clouded by one particular issue. And it’s not that it is final forever. There is going to be negotiation. There is going to be a deal and maybe in next 10-15 days, one month, there is going to be a deal between India and America. We are long standing partners. There will be a deal. What will be the deal – I don’t know, but it will be far better than what it is right now.
So, uncertainty will get cleared at some point of time. So lot of things are going to happen, but right now that looks to be overriding. It’s the nature of the market. They need one headline, and for 10-15, days they will talk about it, and after that, they move on to the next one. And whatever happens in the first one, nobody is bothered.
As the GST thing comes closer, and people come to know that 28% is abolished and it has come down to 18% you look at some auto companies, particularly where the demand is very sensitive to the price cuts. Motorcycles particularly, say if it comes down from 28% to 18%, you could see massive surge in the demand. But, since it has not happened, it is very difficult to figure out whether it will be 20%, 30% jump, or will it be just a muted kind of situation.
My sense is, if it is honestly implemented from 28% to 18% for motorcycle companies or entry level car companies, automotive will be one of the segments to watch out for in next one year. But since it is not done, nobody believes this kind of reforms can happen, markets are sceptical and then, on top of it, this tariff thing is also playing out.Q: The problem with regard to this, Trump’s tariff tantrum is that it’s become a reality. So that’s an issue, because it’s hurting sentiment, and that will be the single biggest trigger, just in the near term, to help those animal spirits to come back. But if we don’t get clarity, say, in the next month, month and a half or there about it will continue to weigh on the markets? Difficult to move up when you have only 10% earnings growth, you have this tariff issue and uncertainty. What is your take?
A: It is not about one thing. You always get a package deal in the economy. You have the GST coming in, the government has so many powers of non-financial reforms also. They think there can be things on education, there can be things on tourism. There can be things on judiciary, on a home front. It is not everything is linked to just tariff and GST and things like that. Let us see when the PM comes back in, next week, from the all his tours, what kind of energy he brings in and what kind of avalanche of reforms they unleash.
I would remain a lot more optimistic about how things are going to shape up, even for earnings. Just yesterday, the all the economist, they were wrong by 1.1% for a quarter. The GDP grew at 7.6% where the expected was about 6.5%, consensus was 6.5% even your biggest of the bank economist, they were at 6.5% and here comes a number which is 7.6% so I think we don’t know everything. This momentum is big. This 7.6% has come without full flow of the credit, without full flow of the fiscal concessions, without full flow of the rate cuts, and now the promises of GST cuts and all. So, there are lot of ammunition to counter if there is anything – of course, 50% tariff, if it becomes long term, it is going to hurt the trade. But the trade itself will find its way and the economy is just not slave to just this tariff. So, we have to be much more calibrated. And it’s a good time that market was overpriced, global markets have run up big time, so we have underperformed in the current year. So now the corrected market, or, I would say, steady market here, thanks to the massive flow we have domestic flow is holding it here, and it is an opportunity for the long-term buyer to look at some of the opportunities.
Q: Beyond your own presentation, which speakers or sessions are you most looking forward to at the conference? Could you name two or three that excite you the most?
A: A: The conference is carefully designed—the organisers sit with me and ask about the sectors or themes I am most interested in. One topic I suggested was AI. There will be a presentation from McKinsey discussing the actual impact of AI—how much is hype and how much is real. AI is evolving rapidly, with trillions of dollars being invested, yet it’s unclear where the earnings will come from. The key question is whether it’s hollow hype, like the internet boom in 2000 that led to a collapse, or if it is earning-supported. AI is expected to have a significant impact on corporate earnings globally, making that trillion-dollar investment meaningful.
Another theme is real estate, with Abhishek Lodha presenting on that. We will also have discussions on quick commerce, featuring Aadit Palicha. One of the most anticipated participants is the Commerce Minister, Mr. Piyush Goyal. Overall, 16 to 17 CEO tracks have been carefully curated to address key issues that are top of mind for investors.
Q: Is there an AI play in India and this is a piece I did sometime back. Most large markets have, and this is where global interest is at all-time high. Maybe it’s a bubble or not. We don’t know. We will see, it’s just food for thought. Lack of AI plays, perhaps also reason for foreigners, lack of interest, enthusiasm, that is one and second you began by saying that this is the time to be opportunistic so is there a watch list for you? And what’s on that watch list?
A: Clearly, I will tell you one thing, AI or no AI, of course, you need some iconic things to happen in the market for the attention to be drawn for these foreigners. But the sustained high earnings growth rate of about 12-13% that’s sufficient, whether it comes from even oil companies, whether it comes from a steel companies, whether it comes from retail companies, consumer companies. The issue is that we have had a slowdown in the earnings and the reasons could be many. It could be a slowdown in the credit flow, it could be inflation, it could be high interest rates, there could be multiple things. I am not a macro guy to figure out why it happened. But definitely there was slowdown in the earnings in last two years,
Once the earnings both picks up to, say, 12%, 13-14%, PE multiple, aggregate, PE multiple, which is at about 22 that will start coming down and good thing is the rest of the emerging markets, they are on the boil, and particularly China. The gap between China India PE multiples, which is at about 16 and 22 right now, if that goes down little more say we stay 22 or 20, and they come up to 18 or so, I think there will be natural flow of the money into the market from foreigners also. Let us not bother about whether there is an AI play or not. And maybe right now pure AI plays in India would be in more of a private equity space, unlisted, very small.
Since I don’t invest directly, my asset management company, fund managers, they are looking for the ideas and the theme of the asset management company at our end, is high quality high growth. In the within QGLP framework, they are looking for high quality high growth companies. The moment high quality, high growth comes together, market tends to misprice them. It looks 30 PE, 40 PE, but then if the company is growing at 50-60% I think there is always a potential for them to rise in terms of prices and beat the markets.
Index composition, if you see is slowly changing. In next 10-15 years, you will see lot of internet-based companies, which are growing at very rapid pace of 50, 60% they will come despite the fact that they may not be earning today much. But their market caps are high, and they would become prominent contributor to the market caps in the indices and eventually also very high-quality earnings to the index. So, Indian indices, Indian market, is also undergoing change in the changing landscape of the kind of corporates which are going to make money.
Q: In the conference over the next two days, what’s the mix of investors like, is it largely local and in local what kind is it? Is it family offices, are you anticipating to see some foreign clients as well? What are you expecting from the mix of the investor base and the questions that they will probably have, also for the companies?
A: It is a very good mix of FIIs is a very large contingents of FIIs are coming from Hong Kong, Singapore, London, from these places. Now, the importance of domestic mutual fund is paramount. Our own mutual funds are now, we are talking about three lakh crores, five lakh crores, seven lakh crores of equity. So, these are the real gods of Indian equities. Of course, they’ll be fully represented here and there are hundreds of companies coming in these three days. So, they will all come at different point of time.
But I would say the most important segment is the domestic mutual funds, insurance companies, so DIIs so called, and then, of course, good mix of FIIs. They are trying to see what kind of mood is here. And we are getting guys from Taiwan and Korea and some far-flung places I have never even visited, so yes there is a lot of interest from a foreigner. But allocations are small compared to what DII can do.
