TradeDeal – The newly announced trade agreement between the United States and India has drawn strong approval from market participants, who see it as a timely boost for Indian equities, export-driven industries, and broader economic indicators. Analysts believe the move could reignite foreign investor interest at a moment when market valuations have moderated and policy signals are turning supportive.
The agreement, unveiled earlier this month, is being viewed as a constructive step toward strengthening bilateral trade ties and improving India’s standing among global investors seeking stable emerging market opportunities.
Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, said the agreement has arrived at a pivotal point for domestic markets. According to him, recent corrections in stock prices have brought valuations to more reasonable levels, while underlying business fundamentals remain intact.
He noted that the trade pact follows a Union Budget that emphasized structural measures over short-term populist steps, creating a favorable backdrop for long-term investors. Sharma expects this alignment of policy and pricing to encourage foreign institutional investors to reassess India as a preferred destination within emerging markets.
Sharma added that a portion of U.S.-based institutional capital could gradually shift toward Indian equities as confidence improves. He suggested that high levels of pessimism in certain market segments may reverse quickly, potentially leading to sharp rallies driven by short covering.
Alongside foreign inflows, domestic institutional investors and retail participants are also expected to remain active, which could collectively strengthen overall market liquidity and momentum in the coming months.
From a sectoral perspective, the agreement is expected to offer tangible gains to industries with strong export exposure to the U.S. Sharma highlighted textiles and apparel, auto components, engineering goods, specialty chemicals, agro-based products, seafood, and select electronics and consumer manufacturing companies as potential beneficiaries.
He said these sectors align closely with the government’s broader push toward expanding exports, boosting domestic manufacturing, and integrating Indian companies more deeply into global supply chains.
Deepak Agrawal, Chief Investment Officer for Debt at Kotak Mutual Fund, described the reduction in tariffs on Indian exports as a positive macroeconomic development. He said the move could help narrow India’s balance of payments gap, support the rupee, and contribute to an increase in foreign exchange reserves.
Agrawal also pointed out that Indian equities have become relatively more attractive over the past year as their valuation premium compared to global peers has declined. This, combined with improving trade conditions, could draw back investors who had remained cautious. He added that a stronger external position may help maintain stability in interest rates.
The gems and jewellery sector has welcomed the easing of reciprocal tariffs, particularly given its dependence on the U.S. market. Colin Shah, Managing Director of Kama Jewelry, said the reduction to an 18 per cent tariff level has helped restore confidence across the industry.
He noted that sentiment had weakened earlier due to higher tariff-related costs, affecting exporters and buyers alike. The revised structure, he said, is expected to provide relief to manufacturers and exporters while improving demand visibility in one of India’s most important overseas markets.
Garima Kapoor, Deputy Head of Research and Economist at Elara Capital, said post-deal estimates suggest India’s effective tariff rate stands at around 14.1 per cent, assuming the removal of Russia-related levies. She added that the revised 18 per cent reciprocal tariff places India broadly in line with comparable economies that face rates near 20 per cent.
Kapoor described the development as broadly supportive for Indian asset classes, citing improved trade competitiveness and reduced external pressure.
The agreement was jointly announced by U.S. President Donald Trump and Prime Minister Narendra Modi on February 2, 2026. Under the revised framework, the U.S. reduced its reciprocal tariff on Indian goods to 18 per cent from 25 per cent and removed an additional 25 per cent punitive levy linked to India’s imports of Russian oil.
Market participants believe these changes could mark a turning point for trade-driven growth and investor sentiment in the period ahead.
