The India-US trade deal – which will see tariffs on Indian exports reduced from 25% to 18% – comes less than a week after India struck a major free trade deal with the EU.
Announce the agreement in a TruthSocial PublicationTrump said India had agreed to stop buying Russian crude oil. He had previously imposed an additional 25% levy in retaliation. India will look to U.S., and potentially Venezuelan, oil, while also pledging to buy $500 billion worth of agricultural, technology, energy and other products, Trump said.
While many specific details Aspects of the India-US deal are yet to be fully finalized – unlike last week’s comprehensive agreement between the EU and India – with India’s manufacturing sector seen as a major early beneficiary, investors say, while information technology and pharmaceuticals could also get a boost.
The country’s labor-intensive export sector, which spans the manufacturing of textiles, clothing, leather, jewelry, toys and furniture, now has an opportunity to regain lost ground to the region’s major manufacturing rivals, according to James Thom, senior director of Asian equity investments at Aberdeen Investments.
Thom identified small and medium-sized businesses among those likely to benefit from an increase in the new 18% duty rate, lower than rival Pakistan, where the levy is 19%, as well as Vietnam and Bangladesh, each of which faces 20% tariffs.
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Nice 50.
“Removing this surplus should also support banks, non-bank financial companies and export-oriented manufacturers, while improving retail confidence in small and mid-caps,” Thom said in a market commentary.
Bernstein said last week’s India-EU treaty likely prompted the United States to fast-track Monday’s deal with India. Analysts noted that the deal broadly aligns India with its peers in the Association of Southeast Asian Nations – “which is progressively very positive” – and strengthens its position vis-à-vis China.
Improved relationshipsBernstein analysts Venugopal Garre and Nikhil Arela said that while some sectors such as automobiles and metals may still face tariffs, information technology will benefit from improving relations between the two countries.
“IT has the most exposure in the United States, and although the deal primarily focused on manufactured goods, our perspective was that improved U.S.-India relations – even if short-lived – would reduce scrutiny of IT services and reduce the risk of further punitive measures, such as additional taxes,” Garre and Arela wrote.
They outlined a tactical buying strategy based on a near-term rebound in Indian stocks, supported mainly by the financial, IT and telecom sectors, while manufacturing and trade-related stocks “are also expected to see some recovery”.
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S&P Bombay Stock Exchange Sensitive Index.
Monday’s deal follows the “historic” India-EU FTA – dubbed “the mother of all deals” by European Commission President Ursula von der Leyen – which significantly reduces or eliminates tariffs on a range of goods and services.
Fitch Solutions’ BMI research unit highlighted India’s pharmaceutical sector, noting the elimination of 11% tariffs on imports of EU medicines – such as cancer treatments, biologics and GLP-1 – which were worth $1.2 billion in 2024.
Growth trajectoryBMI said lower import costs and improved supply chains support its positive outlook for India’s pharmaceutical sector, where it expects the market to grow from $31.2 billion in 2025 to $45.7 billion by 2035, representing a 10-year compound annual growth rate of 5.2% in local currency.
“The agreement will also help India-based companies diversify their export destinations and open up new opportunities in the vast EU market,” it added, highlighting the recent stagnation of Indian pharmaceutical exports.
“This recent stagnation reflects continued market access challenges and regulatory complexity. We believe the FTA will reverse this trend, as the agreement is expected to align regulatory compliance processes, reducing approval times and reducing administrative costs associated with product registration and licensing. This will allow exports to resume their growth trajectory.
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Ashoka Investment Trust India.
Russ Mould, chief investment officer at AJ Bell, said the trade deal had strengthened market sentiment and brought more clarity to investors, highlighting the 2.5% rise in the Sensex following the deal. The Sensex is made up of 30 companies that are among the largest and most actively traded on the Bombay Stock Exchange.
UK-listed investment funds with exposure to India were also among the top gainers on the FTSE 250 on Monday, including Ashoka India’s 5.6% stake, Mold added.
“India has been a rich source of returns for investors over the past decades, but Trump’s tariff regime has dampened the momentum of the Sensex index,” Mold said. “Investors will now question whether the trade deal actually removes the shackles on the market and breathes new life into it, rather than simply leading to a short-term relief rally.”
— CNBC’s Chloe Taylor and Michael Bloom contributed to this story.
