Historic India-US Trade Deal Sealed, Tariff Reductions Announced
After an extended period of anticipation, the landmark India-US trade deal has officially come to fruition this Monday. US President Donald Trump made the pivotal announcement, which includes a significant waiver of the reciprocal 25% tariffs imposed on India for its crude oil purchases from Russia. Furthermore, the tariffs have been substantially reduced from 25% to 18%. This strategic move means that the overall tariff burden on India will plummet from 50% to a more manageable 18% once the trade agreement is fully implemented.
Stock Market Experts Hail a Transformative Development
Financial analysts and stock market experts are unanimous in their view that this development represents a monumental shift for the Indian economy and its financial markets. They emphasize that the stock market serves as a direct reflection of the national economy and is poised to be the first to discount the manifold benefits arising from this deal. Consequently, market participants are bracing for a gap-up opening on Tuesday, with the Nifty 50 index potentially surging past the critical 25,500 resistance level. Investors are being advised to keenly focus on export-oriented stocks across several high-potential sectors, including pharmaceuticals, automotive, information technology, textiles, and gems and jewellery.
Anticipating Market Reaction and FII Inflows
Addressing the likely market response, Seema Srivastava, Senior Research Analyst at SMC Global Securities, expressed optimism. “The India-US trade deal is expected to bring much-needed clarity for both Domestic Institutional Investors (DIIs) and Foreign Institutional Investors (FIIs). It could very well signal a trend reversal in FII trading patterns, prompting them to halt their selling in the Indian markets and potentially resume buying activities in markets like China and South Korea. I am anticipating a gap-up opening on Monday. Once concrete details regarding Trump's revised tariffs are disseminated following the formal sharing of the trade deal information, both DIIs and FIIs are expected to turn into net buyers. This shift could propel key benchmark indices—Nifty 50, Sensex, and Bank Nifty—toward unprecedented peaks,” she elaborated.
Long-Term Implications and Sectoral Benefits
Divam Sharma, Co-Founder & Fund Manager at Green Portfolio PMS, highlighted the long-term impact, noting a potential trend reversal in the Indian stock market. “The India-US trade deal is a massive positive, arriving at a crucial juncture following a budget that emphasized tactical measures over populism. With market valuations having corrected and underlying fundamentals remaining robust, this development should attract FIIs back to Indian markets in the short term. A significant portion of US FII capital is likely to be redirected here, as India is increasingly viewed as the premier strategic investment destination among emerging markets. The prevailing high pessimism could be trapped in a sharp rally fueled by short covering. DIIs and retail investors are expected to join the fray, amplifying capital flows from all directions—investors should prepare for substantial upside momentum!” he stated.
On the specific sectors poised to gain, Sharma added, “Key industries that stand to benefit include textiles and apparel, auto ancillaries and engineering, specialty chemicals, agro and seafood exports, as well as select electronics and consumer manufacturers with significant US exposure. This alignment is particularly synergistic with the recent budget, which has a clear focus on boosting exports, enhancing manufacturing capabilities, and integrating India more deeply into global supply chains.”
Investment Recommendations and Market Outlook
In light of the trade deal and tariff reductions, Anuj Gupta, a SEBI-registered market expert, has recommended 21 stocks for consideration today, spanning the auto, IT, pharma, textile, and defence sectors.
- Pharma: Aurobindo Pharma, Cipla, and Glenmark Pharmaceuticals.
- Defence: BEL, HAL, and Cochin Shipyard.
- IT: TechM, HCL Tech, Wipro, and Infosys.
- Textile: Trident and Welspun Living.
- Auto and Auto Ancillary: Eicher Motors, Tata Motors, TVS Motor, Bajaj Auto, JBM Auto, Bosch, Amara Raja, Exide Industries, and UNO Minda.
Providing insights on the outlook for Sensex and Nifty 50, Shrikant Chouhan, Head of Equity Research at Kotak Securities, remarked, “We maintain the view that 25,000/81,500 and 24,900/81,200 will now serve as immediate support zones for bullish investors. If the market sustains above these levels, a pullback formation is likely to continue, potentially driving indices up to 25,250/82,200 or the 200-day simple moving average (SMA). Further upward momentum could also push the market toward the 25,350/82,500 mark.”
Key Takeaways from the Trade Deal
- The tariff reductions under the India-US trade deal are anticipated to significantly bolster investor confidence in the Indian stock market.
- Key sectors such as textiles, automotive, pharmaceuticals, and IT are likely to reap substantial benefits, making them attractive targets for strategic investment.
- Market experts foresee a potential rally, with the Nifty 50 and Sensex positioned for notable upward movement in the coming sessions.
Disclaimer: The views and recommendations presented above are those of individual analysts or broking companies and do not reflect the stance of Mint. Investors are strongly advised to consult with certified experts before making any investment decisions.
