The India-US trade deal, announced on February 2nd, 2026, is expected to significantly boost Indian equities and trigger a reversal of foreign portfolio investor (FPI) outflows, according to a report by Antique Stock Broking. The agreement, finalized after a phone call between US President Donald Trump and Indian Prime Minister Narendra Modi, removes a major uncertainty that has weighed on Indian markets for the past 15 months.
The report highlights that the US has reduced tariffs on Indian goods to 18% from a previous rate of 25%. This reduction is expected to improve the competitiveness of Indian exports and boost market sentiment. A White House official also confirmed that the US would drop the additional 25% penal levy imposed on Indian imports over New Delhi's purchase of Russian oil, as India has agreed to cease such purchases.
Antique Stock Broking suggests that the FPI equity outflows of approximately USD 34 billion since October 2024, the highest among emerging markets, may reverse due to this deal. The US accounts for roughly 41% of FPI assets under custody in India, and with India's valuation premium relative to other emerging and developed markets nearing long-term averages, renewed inflows are anticipated. They expect the Nifty to potentially reach 29,500 by March 2027, which would be a gain of around 15% from current levels.
Several sectors are expected to benefit from the improved trade relations. Sectors with high FPI ownership, including real estate, telecommunications, transport, financial services, and healthcare, are likely to be the first beneficiaries. Structurally underweight sectors such as capital goods, IT services, and power utilities could also see fresh allocations. Labour-intensive sectors like textiles, gems and jewellery, machinery, chemicals, plastics, and agriculture are also expected to gain from improved competitiveness.
Analysts at Antique believe that this development is significantly positive for Indian equities, as FPI equity flow may reverse, and it could support nominal GDP growth by 50-80 basis points, potentially leading to rupee appreciation. The Chief Economic Advisor (CEA) anticipates India's GDP growth for FY27 to be closer to 7.4%, driven by improved market access and stronger capital inflows.
Vinay Mohan Kwatra, India's Ambassador to the US, lauded the deal, stating it would launch vast opportunities for both nations. Sudarshan Venu, Chairman at TVS Motor Company, stated that the reduction in tariffs improves export competitiveness and reinforces confidence in long-term bilateral economic ties. Mahavir Lunawat, CMD, Pantomath Capital, noted that the deal restores predictability for Indian exporters and enhances competitiveness for India's export-oriented sectors.
The market reacted positively to the announcement, with the BSE Sensex surging over 2,300 points and the Nifty50 up over 2% in early trading.