India-US Trade Deal: Interim Pact to Boost Indian Stock Markets

The Indian stock market is expected to see a surge following the interim trade agreement between India and the United States. The deal, finalized after months of negotiations, aims to reduce tariffs and streamline trade between the two countries. The White House confirmed the agreement, stating that the U.S. would lower tariffs to 18% for key sectors in India in exchange for a $500 million export boost from New Delhi.

Market Impact and Investor Sentiment

The announcement of the India-US trade deal has significantly boosted investor confidence across Dalal Street. The Nifty 50 and Sensex have already seen sharp rises, with the Nifty trading up around 2.8%. This rally reflects optimism about improved trade visibility, lower tariffs, and better growth prospects for export-focused companies. The agreement is expected to strengthen the Indian Rupee against major global currencies, which could attract Foreign Institutional Investors (FIIs) back to the Indian markets.

Key Benefits of the Deal

• Tariff Reduction: The U.S. has agreed to cut tariffs on many Indian goods to about 18%, a substantial decrease from previous rates as high as 50%. This provides Indian exporters with a more predictable and favorable trading environment.
• Smoother Trade Flows: The deal aims to reduce barriers for exporters and lower uncertainty about future trade costs, making Indian companies more competitive in the U.S. market.
• Boost to Specific Sectors: Sectors like textiles, engineering goods, chemicals, IT-linked manufacturing, leather and footwear, and seafood are expected to benefit significantly from the improved trade conditions.
• Increased Cooperation: The agreement signals deeper cooperation on supply chains and long-term economic engagement, which is viewed positively by the markets.

Stocks to Watch

Several sectors are expected to see an upswing, making specific stocks attractive for investment. Anuj Gupta, a SEBI-registered market expert, has recommended stocks from various sectors, including auto, IT, pharma, textile, and defence.

• Textiles: Companies like Gokaldas Exports, Kitex Garments, Indo Count Industries, Trident, and Welspun Living are expected to benefit from the reduced tariffs. Gokaldas Exports, for instance, surged 20% recently, hitting an intraday high of ₹832.85 on the NSE.
• Auto and Auto Ancillary: Eicher Motors, Tata Motors, TVS Motor, Bajaj Auto, JBM Auto, Bosch, Amara Raja, Exide Industries, and UNO Minda are also recommended.
• IT: TechM, HCL Tech, Wipro, and Infosys are among the IT stocks to consider.
• Pharma: Aurobindo Pharma, Cipla, and Glenmark Pharmaceuticals are key picks in the pharmaceutical sector.
• Defence: Stocks like BEL, HAL, and Cochin Shipyard could also see positive movement.

Other potential beneficiaries include Vinati Organics, Gujarat Flouro, Fine Organics, Elgi Equipments, The Anup Engineering, and NRB Bearings Ltd.

Impact on Indian Farmers

Commerce Minister Piyush Goyal has assured that the interim agreement does not include any item that would harm Indian farmers. Sensitive agricultural items have been kept out of the deal, ensuring that Indian farmers and MSMEs receive duty-free entry into the U.S. market in several areas.

Overall Sentiment

The India-US trade deal is a significant step forward in bilateral economic ties, opening a USD 30 trillion market for Indian exporters. The reduction in tariffs and the removal of additional duties have restored India's standing in the U.S. market. This interim pact is expected to boost the Indian stock markets, with numerous stocks across various sectors poised for an upswing.