Analysts worry about the possible effects of an impending trade agreement between the US and India on the Indian stock market. Sectors like textiles and jewels could gain a great deal from the potential reduction of tariffs. Will the ramifications of this accord be more subdued or will it lead to a wider reversal of market trends?
According to media sources, a highly anticipated trade agreement between the United States and India could be announced by the end of November.India would permit duty-free imports of soybeans, corn, and specific dairy products from the United States, according to a Deccan Chronicle article. Government officials who were aware of the developments regarding the bilateral trade agreement (BTA) between the two countries previously stated that a fresh round of trade talks would not be necessary, according to news agency ANI.
The 50% US tariff on India has been one of the main causes of this year's volatility in the Indian stock market. Can the local equity market undergo a trend reversal as a possible deal gets closer?
The 50% US tariff on India has been one of the main causes of this year's volatility in the Indian stock market. Can the local equity market undergo a trend reversal as a possible deal gets closer?
What effects may a trade agreement between the US and India have on the Indian stock market?
Although a trade agreement between the two nations might be a major catalyst, the market seems to have factored in the likelihood of such an agreement. The impacted industries, including textiles, jewelry, and gems, would benefit greatly if the agreement lowers tariffs to the 15–16% range. It is unlikely to act as a significant market-wide driver, though.
"It will undoubtedly be a good thing. There should be a sentimental response in the market. Recent market action, however, raises the possibility that some of this confidence has already been taken into account—perhaps insiders already know what's next."
Although a trade agreement between the two nations might be a major catalyst, the market seems to have factored in the likelihood of such an agreement. The impacted industries, including textiles, jewelry, and gems, would benefit greatly if the agreement lowers tariffs to the 15–16% range. It is unlikely to act as a significant market-wide driver, though.
"It will undoubtedly be a good thing. There should be a sentimental response in the market. Recent market action, however, raises the possibility that some of this confidence has already been taken into account—perhaps insiders already know what's next."
However, in industries like textiles, jewelry and gems, and electronics manufacturing services (EMS), we may witness selective purchasing. Businesses that export mobile devices to the US in particular stand to gain. Therefore, it's more likely to be a sector-specific rise than a general one, according to Mishra.
The specifics of the agreement will determine a lot. The market will keep a careful eye on whether India has won fresh advantages or has to make concessions on certain areas.
Relaxations in certain trade areas, for instance, might bring India's trading terms into line with those of some of its neighbors.
The specifics of the agreement will determine a lot. The market will keep a careful eye on whether India has won fresh advantages or has to make concessions on certain areas.
Relaxations in certain trade areas, for instance, might bring India's trading terms into line with those of some of its neighbors.
Mishra claims that the market might be positively surprised if the deal proves to be more advantageous. However, the response might be subdued if India is just on level with other countries.
The market will keep a close eye on the government's position on laws pertaining to agriculture. The devil is in the details, as usual.
A tariff range between 15 and 25 percent is probably partially priced in, according to Shrikant Chouhan, head of stock research at Kotak Securities, while rates exceeding 25 percent could negatively impact sentiment. On the other hand, a tariff of less than 15% would be extremely positive for the market.
The market will keep a close eye on the government's position on laws pertaining to agriculture. The devil is in the details, as usual.
A tariff range between 15 and 25 percent is probably partially priced in, according to Shrikant Chouhan, head of stock research at Kotak Securities, while rates exceeding 25 percent could negatively impact sentiment. On the other hand, a tariff of less than 15% would be extremely positive for the market.
"If tariffs stay below 20%, important export-oriented industries like pharmaceuticals, textiles, and jewelry and stones stand to gain. President Trump's promise to not take a tougher position on H1B visas has improved clarity for the IT industry, which is a huge plus, according to Chouhan.
According to Chouhan, the Nifty 50 may test the 27,000 level with the help of BFSI and technological resiliency.
"Even if profits have been subdued thus far, results have been in line with forecasts, and hope for a better Q3 performance is growing. Chouhan stated, "The overall market setup appears constructive with stable global cues."
If a trade agreement between the US and India is announced in November, it will coincide with an improvement in the mood of the home market.
According to Chouhan, the Nifty 50 may test the 27,000 level with the help of BFSI and technological resiliency.
"Even if profits have been subdued thus far, results have been in line with forecasts, and hope for a better Q3 performance is growing. Chouhan stated, "The overall market setup appears constructive with stable global cues."
If a trade agreement between the US and India is announced in November, it will coincide with an improvement in the mood of the home market.
Earnings are anticipated to significantly improve from the third quarter following a respectable Q2, and the macroeconomic fundamentals are encouraging.
Foreign investment flows, however, have been erratic. Things are still a little unclear on a global scale.
FIIs are still wary since, notwithstanding recent underperformance, India's valuations are still higher than those of nations like Taiwan and South Korea, which are now experiencing faster profits growth, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
It's also critical to avoid thinking of FIIs as a monolithic group.
"Hedge funds, who have been withdrawing funds from India to engage in the AI trade, have been responsible for the majority of the selling. The current fall in AI equities is actually beneficial for India, and that trend needs to stabilize," stated Vijayakumar.
Foreign investment flows, however, have been erratic. Things are still a little unclear on a global scale.
FIIs are still wary since, notwithstanding recent underperformance, India's valuations are still higher than those of nations like Taiwan and South Korea, which are now experiencing faster profits growth, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
It's also critical to avoid thinking of FIIs as a monolithic group.
"Hedge funds, who have been withdrawing funds from India to engage in the AI trade, have been responsible for the majority of the selling. The current fall in AI equities is actually beneficial for India, and that trend needs to stabilize," stated Vijayakumar.
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