India EU FTA: Textile, pharma and chemical sectors are expected to benefit the most from tariff reduction…
highlights
- The upcoming Free Trade Agreement (FTA) between India and the European Union can open up huge opportunities for Indian exporters.
- Under this deal, the textile, pharma and chemical sectors are expected to benefit the most from the reduction in tariffs on most products by the EU.
- Its direct effect is clearly visible in the stock market and can be seen in future also.
India-EU Free Trade Deal: India’s historic free-trade agreement with the European Union, which is being called the ‘Mother of All Trade Deals’, has become a topic of discussion among investors. Reduction in tariffs and easing of rules are expected to boost exports. Now the big question is which stocks can create a stir after this deal! Which are those shares which will remain on the radar of investors after this deal?
India has signed a Free Trade Agreement (FTA) with the European Union – described by Prime Minister Narendra Modi and European Commission President Ursula von der Leyen as the ‘Mother of All Trade Deals’. After this, there is a race among investors to know which stocks will benefit when the tariff walls fall and regulatory hurdles reduce in this group of 27 countries. Investors would also like to know which are those stocks which may see a decline after this deal.
Which sectors will benefit?
If we look at the major aspects of the deal, then on a cursory basis, textiles, pharmaceuticals and specialty chemicals can prove to be the biggest winners, while shrimp exporting companies, auto accessories components and jewelery retailers are at second place. Automobile manufacturers and Sula Vineyards are facing short-term pressure.
On the hope that duty cuts and easy approvals will trigger new trade flows worth billions of dollars, shares of export-dependent companies rose by 12 to 15 percent on Tuesday. Sector wise, textile and select pharma and chemicals could be the top gainers.
The India-EU FTA will give a boost to sectors like textiles, clothing, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles, reducing tariffs from 10% to zero on exports worth about $33 billion. India said it has achieved unprecedented market access to over 99% of Indian exports by trade value to the EU, which also strengthens the ‘Make in India’ initiative.
textile sector
Indian textile companies are expected to benefit the most from the Free Trade Agreement (FTA) between India and the European Union (EU). According to the Commerce Ministry, the EU will reduce or eliminate tariffs on 99.5% of products in seven years. Under this, tariffs on Indian marine products, leather, textiles, chemicals, rubber, base metals and gems and jewelery will be reduced to zero.
Currently the EU imposes import duty of 10–12% on Indian textiles, putting India at a price disadvantage compared to zero-tariff countries like Bangladesh and Vietnam. If these tariffs reduce to zero then India’s position will be stronger than these countries and it will come at par with these countries. Nightwear, outerwear and trousers are key segments where Indian exporters can increase share.
Which stocks will see action?
KPR Mills is believed to be the biggest gainer from the deal, with an estimated 58–60% of FY25 earnings linked to the EU. On Tuesday, January 27, its shares rose 3% to an intraday high of Rs 875.
Other major gainers include Pearl Global, Welspun Living, Gokaldas Exports, Nitin Spinners, Vardhman Textiles, Trident and Indo Count. After the deal was announced on January 27, Gokaldas Exports rose 5%, Welspun Living rose 3.5%, Vardhman Textiles rose 5% and Trident rose 4%.
A rise was also seen in the shares of companies related to shrimp export. Avanti Feeds rose 3% to Rs 780 and Apex Frozen Foods jumped 12% to Rs 296.
Good days are coming for pharma stocks
The pharma sector is expected to benefit more from regulatory reforms than from tariff cuts. India’s pharma formulation exports to the EU are worth about $2.95 billion, but India’s share in total pharma imports to the EU is only 2.2%. Currently, drug approval in the EU takes 2–3 years and fees of up to Rs 3 lakh. With the simplification of procedures under FTA, Indian generic companies can win more tenders and reduce their dependence on the US market.
Major beneficiary companies include Dr. Reddy’s, Lupine and Sun Pharma. Whereas Biocon, Aurobindo Pharma, Torrent Pharma and Ipca Labs can benefit from biosimilar and CDMO opportunities.
Chemicals: India has a big opportunity
India exported chemicals worth about $8.9 billion to the EU in 2024, while imports stood at $7.7 billion. After the Russia-Ukraine war, European companies are struggling with strict regulations, due to which outsourcing of production is increasing.
FTA will provide new opportunities to Indian chemical companies. The companies which will benefit the most include companies like SRF, Naveen Fluorine, Gujarat Fluorochemicals, Aarti Industries, PCBL, Jubilant Ingrevia.
Movement may be seen in these shares also
- Retail: Titan and Senco Gold may benefit from 15–25% tariff reduction on gems and jewellery.
- Metals: Tata Steel, JSW Steel, HEG and Graphite India expect limited but positive impact.
- Auto Ancillaries: Bharat Forge, Craftsman Automation and Happy Forgings may get increasing orders from European OEMs.
- Two-wheelers: Bajaj Auto and TVS Motor may benefit from around 8% duty cut on motorcycles.
Who is likely to be harmed?
India’s top car manufacturing companies, including Mahindra & Mahindra, Maruti Suzuki India, Tata Motors and Hyundai Motor India, may suffer some loss from this deal. Auto shares fell as much as 5% on Tuesday as tariffs on cars imported from Europe were cut from 110% to 10% for a limited quota of 250,000 vehicles.
Mahindra & Mahindra shares fell as much as 5.1% to their lowest level since August 2025. Shares of Hyundai Motor India fell 4.5%, while Maruti Suzuki India fell as much as 3% and Tata Motors Passenger Vehicles was down 2%.
Shares of alcoholic beverages companies also fell. EU wine duties will be reduced from 150% to 20% for expensive wines, while wines priced below 2.5 euros will receive no duty concessions. Shares of Sula fell nearly 4%, while other alcohol stocks like United Spirits, United Breweries, Piccadilly Agro were seen trading down 2-3%.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.
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