After the announcement of India-US trade deal, Sensex rose by more than 4,2000 points on Tuesday, while Nifty rose by almost 5 percent to reach its lifetime high of 26,373. This historic agreement is being considered as a game-changer for the Indian stock market. This is likely to reverse the massive FII selloff of $34 billion since October 2024, which is the highest among emerging markets as the US accounts for about 41 percent of total FII assets. Jefferies equity analyst Mahesh Nandurkar said in a media report that this is a big boost for investor morale. Automobile supporting companies, solar energy makers, chemicals, textiles and Adani Group companies can benefit greatly.
Investments of foreign investors will be returned
The deal will promote immediate revaluation for businesses that have been directly and indirectly impacted by high US tariffs, including banks, IT services, pharma, industrial sectors (especially power transmission and distribution components, cables and conductors), defence, textiles and chemicals.
Analysts say that if we try to look from a sectoral lens, export oriented sectors like IT services, pharmaceuticals, special chemicals, auto accessories and selected engineering goods will be the most beneficial. Lower tariff barriers will improve the price competitiveness of Indian companies in the US market, which remains India’s largest export destination. Over time, this can lead to better order flow, margin stability and higher capacity utilization.
Axis Securities said in its report that the deal enhances earnings clarity, supports valuation re-rating, especially for export-oriented and capex-related sectors, and strengthens India’s position as a relatively safe investment destination among emerging markets.
Which sectors benefit the most?
Nuwama said in media reports that labour-intensive sectors like textiles and gems/jewellery will clearly benefit. The brokerage firm said these are the sectors most impacted by Trump’s 50 per cent tariffs (pharma, electronics etc were largely exempted from the Trump tariffs). The firm further said that this will not only boost exports but will also create jobs in India.
The trade deal is also expected to increase capital flow into India and improve the country’s balance of payments. Nuwama said income tax is expected to strengthen, which has been underperforming emerging foreign currency markets for more than a year. This will also improve the domestic liquidity situation.
Top stock selection after trade deal
Jefferies has included FII’s favorite stock ‘Eternal’ in its model portfolio, along with increased investment in metal sector and reduced its investment in IT sector. Stocks with significant exposure in the US include auto component companies like Sona Comps and Bharat Forge, chemical companies like Naveen, PI Industries and SRF, solar energy companies like Vari, Premier Energies and MMV and textile companies like Welspun Living.
Top positive stocks of Axis Securities include Dr. Reddy’s Laboratories, Lupine, Aurobindo Pharma, Aarti Industries, Pitti Engineering, Kirloskar Brothers, Welspun Living, Sansera Engineering, Steel Strip Wheels, Infosys, HCL Tech and LTI Mindtree. The stocks that Axis Securities has not included in its portfolio include Sun Pharma, Divis Lab, KPR Mills, Gokaldas Exports, Indo Count Industries, UPL, Bharat Forge, Samvardhan Motherson, Dixon Technologies and Sona BLW.
According to Antic, sectors that could benefit include sectors where FII holding is high, such as real estate, telecom, transport, financial services and health services, as well as sectors where FII over/under holding is the weakest since September 2018, such as capital goods, financial services, IT services and power utilities.
What is the expert’s advice?
Apoorva Sheth, Head of Market Perspectives and Research, SAMCO Securities, said in an ET report that the market is expected to be bullish as there are many short positions in the system which will be squared off. But to maintain this trend we will have to expect new long positions to form. Sheth also warned not to expect miracles, he said in the media report that it should also be remembered that exports to America are a small part of our GDP of 4 trillion US dollars. So, yes, the trade deal is good for the economy and markets in the short term, but don’t expect miracles from it.