As global trade tensions rise with tariff wars, led by policies like those championed by Donald Trump, Indian investors face new challenges. Inflation, fuelled by these economic shifts is one of the biggest worries for smart investors. After all, it erodes purchasing power, driving up costs for essentials like fuel, food, and education. While India’s official retail inflation hovers around 4%, the real impact feels heavier for many households. So, how can you safeguard your wealth amidst these turbulent times?
Warren Buffett, the Oracle of Omaha, has navigated inflationary storms for decades. His time-tested strategies offer a shield against the collateral damage of tariff-driven inflation. By focusing on resilient businesses and smart investment choices, Buffett’s approach can guide Indian investors to protect and grow their wealth. Let’s explore how his principles can help you thrive in this era of economic uncertainty.
You see, inflation (whatever it is a result of) keeps eating away at what your money can buy. A litre of milk that costs Rs 60 now will set you back Rs 63 next year if inflation hits 5%. This adds up when you think about long-term goals like retiring or paying for school. Buffett got this idea to his core. In his 1981 letter to Berkshire Hathaway shareholders, he called inflation a “gigantic corporate tapeworm” that gobbles up returns.
He saw this happen right in front of him during the 1970s when US inflation shot up to double digits, and again in 2022 when it jumped to 9%. India faced similar problems, with inflation peaking at 7.8% in 2022. Instead of trying to guess what inflation will do, Buffett focuses on getting ready for it.
Let us look at the rules Warren Buffet follows. But before we go ahead, do note that none of the stock names mentioned in this article are recommendations. The names have only been used to drive a point home. Let’s go…
Rule 1: Invest in Businesses with Pricing Power
Buffett looks for companies that can raise prices without losing customers—an idea called pricing power that guards against inflation. His letters often talk about companies like Coca-Cola, which can charge more because people love the brand. When costs go up, these businesses pass them on to customers keeping their profits safe.
So, for the companies affected by the tariff wars, if they have pricing power, it is still a game in their favour. Take the paint industry as an example. If raw material costs go up, market leaders like Asian Paints can hike prices without losing market share, due to strong brand loyalty. In the same way, Nestlé India, which makes Maggi noodles and KitKat, keeps demand steady even during inflation. These products stayed top sellers during pandemic lockdowns as well. Such companies manage rising costs better than rivals making them valuable additions to a portfolio.
Rule 2: Focus on Consistent Cash Flow
Buffett likes companies that bring in steady cash every year. What is the reason? Because rising prices push up all costs, from raw materials to employee salaries. And that is exactly what these Tariff prices could do – price rise! So, businesses with steady cash flow can handle these expenses without borrowing too much or cutting back on quality. In his 1991 letter, Buffett spoke of companies that do not need to keep reinvesting just to keep up with inflation. He called these businesses “economic franchises.”
For Indian investors, think about companies like Hindustan Unilever (HUL). They market everyday necessities—soaps, shampoos, detergents—that people buy no matter how the economy looks. In FY24, HUL’s operational cash flow topped Rs 15,000 crore giving them plenty of muscle to fight inflation. ITC offers another good example, with its mix of businesses covering FMCG, cigarettes, and hotels. ITC’s reliable cash flow helps it manage rising costs while keeping up dividend payments even when times get tough.
Rule 3: Avoid Cash—It is a Losing Bet
Buffett once said “Cash is trash” when talking about inflation. His 2022 letter explained that keeping cash during high inflation is like watching your money shrink. If inflation hits 5% while your savings account gives you 3%, you are losing 2% each year. This is a real worry in India where fixed deposits pay 6-7%, but with 5.5% inflation plus taxes on interest, your actual returns end up close to zero.
Instead of hoarding money, Buffett puts his cash into top-notch companies. This suggests that Indian investors should move their savings into assets that can beat inflation caused by events like these tariff rises. Shares of firms like those we talked about earlier might grow quicker than inflation as time goes on. Even big-company stock funds—like those following the Nifty 50—could guard your money better than cash. The main idea? Put your money in assets that grow, not in ones that just sits there.
Rule 4: Spot Bargains In Dips
You see, the Tariff wars have affected markets across the globe. Look at the Indian stock market, crashed like a house of cards in February and is still trying to recover. Stock prices often fall when market volatility increases due to such events. Buffett sees these times as chances to buy. He invested in firms like Goldman Sachs at extremely attractive prices during the 2008 global money crisis. India has seen similar things happen. The Nifty 50 fell 40% in the 2020 lockdown crash, but good stocks like Infosys later bounced back and went up a lot.
Right now, some strong Indian stocks are cheaper than usual, thanks to Trumps Tariff tantrums. Buffett would ask: Can these companies handle inflation? If so, they might be good to invest in. For example, a stock in a growing field like agro tech with clear chances to grow could be a Buffett-type opportunity. But you still need to study —Buffett always does his homework.
Rule 5: Think Long-Term, Ignore Short-Term Noise
With countries battling the Tariffs, a lot of ups and downs are expected making prices change in the coming months. Buffett does not let this chatter sidetrack him. He plans for the long haul, not just for today. In his 2011 letter, he said, “Our favourite holding period is forever.” He keeps stocks like Coca-Cola for 30 years because great companies grow despite inflation, not against it.
Indian investors should think long-term. Do not panic when events like this tariff war make the jump or crash. Companies like TCS and HDFC Bank have grown 15-20% each year for the last ten years beating inflation by a big margin. Think about starting a Systematic Investment Plan (SIP) in a good mutual fund and stick with it. If you keep at it, your money will grow even though inflation eats away at it.
Rule 6: Diversify, but Don’t Overdo It
Buffett thinks diversification helps manage risk, but he stays away from spreading investments too thin. He focuses on a few top-notch companies he knows inside and out. For Indian investors, this means building a portfolio that can withstand inflation without holding too many stocks. A well-balanced mix across sectors—such as FMCG, IT, and banking—offers stability. These industries tend to do well during inflation because they meet basic needs or have global demand.
But do not branch out into areas you do not know well, like risky startups or crypto currencies. Buffett has always avoided these assets for this reason. Putting your money into a handful of solid companies better prepares you to face the challenges of inflation.
The Buffett Way: A Tariff War Antidote Indian Investors
Even though the Tariff Wars have caused problems worldwide, Buffett’s ideas work everywhere. From Nebraska to India, his methods can protect and grow your money in such times. These include finding companies with pricing power, focusing on cash flow, not holding too much cash, buying when prices drop, thinking long-term, and spreading out investments.
The Indian market gives you plenty of chances to use these ideas. You can look for good deals on stocks that are cheap right now but have potential.
Look over your investments. Can they handle inflation caused by the Tariff War or anything else? Which of Buffett’s ideas could you start using now? Keep in mind, you can always make a change for the better.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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