Synopsis
Indian stocks are expected to outperform Asian markets. A new trade deal with the United States has removed a major concern for investors. This agreement should bring back foreign capital. The Indian rupee could also see support. Initial market reactions show optimism for the coming trading sessions. Investors are looking forward to the potential growth of Indian stocks.
BloombergIndian stocks are ready to reduce their rare underperformance compared to their Asian peers after New Delhi and Washington reached a long-awaited agreement. trade agreementremoving a large surplus that had weighed on the country’s financial assets and triggered record foreign capital outflows.
The deal, announced Monday evening India time, saw President Donald Trump reduce reciprocal tariffs on Indian goods from 25% to 18% and eliminate an additional 25% duty linked to India’s purchases of Russian crude oil. The move is widely seen by fund managers as a catalyst to lure global investors back into Indian stocks, which recorded their worst January since 2016, while also providing support to a rupee that has slipped to a series of all-time lows.
“This is a good reset for Indo-US trade which could make foreign investor sentiment towards India positive,” said Arvind Chari, Chief Investment Strategist at Q India UK. “India’s underperformance relative to emerging markets could be reversed.”
Initial market reactions have highlighted an increase in risk appetite. Clever 50 Futures contracts traded at GIFT City jumped as much as 4.5% overnight following the announcement, signaling optimism ahead of Tuesday’s session. Cash stocks had shown tentative signs of a rebound earlier in the day, with the NSE Nifty 50 index climbing 1.1% – its biggest gain in more than two months – even as most Asian markets closed in the red amid a broader regional sell-off. The advance came despite investor concerns over a proposed tax hike on equity derivatives in the Feb. 1 budget and a sharp decline in metals prices that weighed on risk assets globally.
BloombergIndia’s valuation premium over Asia also fell to its lowest level in almost five years as concerns over high U.S. tariffs and a prolonged profit slowdown weighed on sentiment. The finalization of the trade deal comes just a day after Sunday’s budget, which offered further support to exporters and strategic sectors such as rare earths, reinforcing early signs of improving investor confidence.
“This is a big development coming immediately after a groundbreaking budget announcement which will lead to a reversal of foreign capital outflows and also a rally in the Indian currency,” said A Balasubramanian, managing director of Aditya Birla Sun Life AMC “Nearly $100 billion was waiting to enter India over the next two to three years, pending tariff settlement with the US.”
Yet not all of the challenges facing India have abated. Results this reporting season have been mixed and investors are awaiting clarity on India’s commitment to buy $500 billion worth of goods from the United States as part of the deal. At the same time, the possibilities for further monetary easing are narrowing, with economists surveyed by Bloomberg expecting the central bank to hold rates on February 6.
“The deal presented by U.S. officials appears relatively favorable, although questions will arise about whether the $500 billion purchase commitments will ever come to fruition,” said Michael Brown, senior research strategist at Pepperstone Group.
For now, investors are looking past near-term uncertainties, welcoming the finalization of the U.S.-India trade deal and the growth-oriented focus of the budget, which prioritized incentives for manufacturing and infrastructure spending. Morgan Stanley expects stronger capital spending, growth in the services sector and wider adoption of AI to support profit growth in the financial year starting April 1.
“We remain constructive on Indian stocks,” strategists including Ridham Desai wrote in a note before the meeting. US trade deal ” was announced, highlighting the emphasis on semiconductors in the budget speech as a signal of long-term growth priorities.
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(What’s moving Sensex And Clever Track latest market news, stock market advice, Budget 2025, Equity market on the 2025 budget And expert adviceon AND Markets. Additionally, ETMarkets.com is now on Telegram. For the fastest news alerts on financial markets, investment strategies and stock market alerts, subscribe to our Telegram feeds .)
Subscribe to AND Bonus and read it Electronic document on economic times Online.and Sensex today.
Most trending stocks: SBI share price, Axis Bank share price, HDFC Bank share price, Infosys share price, Wipro stock price, NTPC stock price
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