A much-awaited India–US trade deal may be on the horizon, with media reports suggesting that both countries could announce the nearly finalised agreement by the end of November.
According to a Deccan Chronicle report, India will allow duty-free import of soybean, corn and certain dairy products from the US. Earlier, news agency ANI reported that government officials aware of the development over the bilateral trade agreement (BTA) between the two nations said that another round of trade negotiations may not be required.
US tariffs on India, at 50 per cent, have been among the biggest factors behind volatility in the Indian stock market this year. As a potential deal appears near, can it trigger a trend reversal in the domestic equity market?
How will an India-US trade deal impact the Indian stock market?
While a trade deal between the two countries could be a key trigger, the possibility of such an agreement appears to be largely priced in by the market. If the deal brings tariffs down to the 15–16 per cent range, it would provide significant relief to affected sectors such as textiles and gems and jewellery. However, it is unlikely to serve as a major catalyst for the broader market.
“It will definitely be a positive development. Sentimentally, we should see some reaction in the market. However, recent market movement suggests that some of this optimism may already be factored in — perhaps insiders already have an idea of what’s coming,” said Ajit Mishra, SVP of research at Religare Broking.
“That said, we might see selective buying in sectors that were previously beaten down, such as textiles, gems and jewellery, and electronics manufacturing services (EMS). Especially companies involved in mobile exports to the US could benefit. So, it’s likely to be a sector-specific rally rather than a broad-based one,” said Mishra.
A lot will depend on the details of the agreement. The market will closely watch whether India has had to compromise on certain issues or gained new advantages.
For example, there could be relaxations in specific trade areas, which might align India’s trade terms with those enjoyed by some neighbouring countries.
According to Mishra, if the deal turns out to be more favourable, it could positively surprise the market. But if India is merely on par with others, the reaction may be muted.
The government’s stance on agriculture-related provisions will also be important — the market will closely watch that. As always, the devil lies in the details.
Shrikant Chouhan, the head of equity research at Kotak Securities, believes a tariff range between 15–25 per cent is likely partially priced in, while rates above 25 per cent could weigh on sentiment. Conversely, a tariff below 15 per cent would be strongly bullish for the market.
“Key export-oriented sectors such as pharma, textiles, and gems and jewellery stand to benefit if tariffs remain below 20 per cent. For the IT sector, clarity has improved after President Trump’s assurance of no stricter stance on H1B visas – a significant positive,” said Chouhan.
Chouhan believes supported by resilience in technology and BFSI, the Nifty 50 could potentially test the 27,000 mark.
“Despite muted earnings so far, results have met expectations, and optimism is building for a stronger Q3 performance. With stable global cues, the overall market setup appears constructive,” said Chouhan.
An India-US trade deal, if announced in November, will come at a point when domestic market sentiment is improving.
After a decent Q2, earnings are expected to recover further from the third quarter, and the macroeconomic fundamentals are supportive.
However, foreign investor flows have been somewhat inconsistent. Globally, things are still a bit uncertain.
According to VK Vijayakumar, Chief Investment Strategist, Geojit Investments, FIIs remain cautious because, even after recent underperformance, India’s valuations are still higher than markets like Taiwan and South Korea, which are currently delivering stronger earnings growth.
Also, it’s important not to view FIIs as a single group.
“The bulk of the selling has come from hedge funds, which have been pulling out money from India to participate in the AI trade. That trend needs to stabilise — and the current correction in AI stocks is actually positive for India,” Vijayakumar said.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
