India-US Trade Deal: The news of the US President’s announcement of trade deal with India-US has come as a big relief for the Indian market…
highlights
- With the announcement of India-US trade deal, the big overhang of the stock market seems to be removed.
- Export sectors have got relief due to reduction in tariff from 25% to 18%.
- In this, textile, pharma and manufacturing stocks will be kept in focus.
India-US Trade Deal: The news of agreement on trade deal between India and America has come at a time when the domestic stock market was struggling with a big overhang for a long time. Amidst global uncertainties, concerns about tariffs and caution from foreign investors, this deal has emerged as a strong sentiment booster for the market. After the talks between US President Donald Trump and Prime Minister Narendra Modi, it became clear that America will reduce the reciprocal tariff on Indian goods from 25% to 18%, while India will also move towards ‘zeroing’ its tariff and non-tariff barriers against America.
Why did the market get relief from tariff reduction?
The biggest pressure on the market for some time was that if tariffs remain high for a long time, the competitiveness of Indian exporters may weaken. The tariff level of 18% is a relief to the market, as it does not put India at much of a disadvantage compared to competing countries like Bangladesh, Vietnam and Indonesia. This indicated that Indian companies can remain in the global supply chain and there will be no major shock in exports.
Read full article
Confidence returning to export sectors
Those sectors that export directly to America seem to be benefiting the most from this deal. Investors are eyeing labour-intensive sectors like textile, gems and jewellery, leather, pharma and electronics. Earlier there was a fear in these sectors that orders might shift due to higher tariffs, but now this overhang has been removed to a great extent.
There is talk of increasing purchase of American products by India in sectors like energy, defence, technology, agriculture and coal. This indicates that both the countries are ready to give space to each other regarding trade balance.
Focus on defence, energy and manufacturing
It has come to light that defense and energy imports will increase under the deal. This can create long-term opportunities in defense manufacturing, aerospace, oil and gas and related infrastructure sectors. Apart from this, activity in sectors like electronics and data centers is also expected to increase.
Shift from gold and silver to equity
In recent months, domestic investors were leaning more towards gold and silver due to uncertainty. After the news of the trade deal, the fear in the market seems to be reducing a bit. Even though valuations may not be cheap right now, the improvement in sentiment indicates a gradual return of money to equities.
Will still keep an eye on details
Although this deal is positive in terms of sentiment, the market will now pay attention to its fine print. In which sectors, how much concession has India given, what will be the conditions regarding agri products and non-tariff barriers, the answers to these questions will decide the future direction.
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.
related news
end of article
