Indian Export Stocks Buoyed by Trade Deal Hopes Amid Market Surge
Reports of significant progress in trade negotiations between India and the United States have fueled a rally in Indian export-oriented stocks, particularly in the IT and textile sectors. The market is inching closer to record highs, driven by optimism surrounding a potential trade agreement that could drastically reduce US tariffs on Indian goods.
The potential agreement could see US tariffs on Indian exports slashed from 50% to approximately 15-16%, providing a substantial boost to export-focused industries. Shares of textile and seafood companies have already surged in anticipation of easier access to US consumers. IT stocks have also outperformed, with confidence boosted by strong earnings reports from major players. Healthy earnings from banks and Reliance Industries, coupled with robust festive shopping, have further bolstered the market rally.
Commerce and Industry Minister Piyush Goyal has stated that talks with the US are progressing, with both sides aiming for a fair and equitable deal in the near future. The proposed pact aims to more than double bilateral trade to $500 billion by 2030. The United States is currently India's largest trading partner, with total trade valued at $131.84 billion in 2024-25, including $86.5 billion in exports.
The trade deal's progress is especially significant considering the strain in India-US trade relations after the previous administration imposed a 50% tariff on Indian goods, including additional duties on imports linked to Russian crude purchases. These duties were termed "unfair, unjustified, and unreasonable" by India.
As part of the proposed agreement, India may agree to gradually reduce its imports of Russian oil and allow more non-genetically modified (GM) American corn and soymeal into its markets. In return, the US is expected to offer concessions on energy trade. The US is also likely to provide tariff relief for Indian goods such as textiles, pharmaceuticals, and engineering products.
The timing of the deal reflects a mix of strategic and economic calculations for both countries. For the US, the move serves commercial and geopolitical objectives, strengthening ties with a key Indo-Pacific ally amid its competition with China. By encouraging India to diversify away from Russian oil, the US seeks to tighten global enforcement of sanctions on Moscow while deepening its strategic partnership with New Delhi. For India, the agreement offers a chance to expand export opportunities, diversify energy imports, and reinforce its global economic standing.
Several trade agreements are already in operation between India and other nations, including those with ASEAN, Japan, South Korea, the UAE and Australia. India is actively involved in negotiations for various strategic trade agreements, including those with the EU, the UK, the Gulf Cooperation Council (GCC), Canada, and the Eurasian Economic Union (EAEU). The Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) is slated for implementation starting October 1, 2025.
The market's positive response reflects growing confidence in an early deal. If the reported tariff structure materializes, it will be a major positive for the economy and equities. Analysts also point to strong technical momentum, festive sales, renewed foreign institutional investor (FII) buying, and short-covering as factors fueling the rally.
However, some analysts caution that much of the potential upside from a trade deal may already be priced into the market. They suggest that the market could be set for some near-term consolidation. Despite the optimism, the deal is not yet final, and timelines remain uncertain. Market reactions are currently based on expectations, meaning volatility cannot be ruled out.
