In a major overnight development, the United States has reached a trade agreement with India. Brokerages say this could end a long phase of uncertainty and give markets the push they need as trading begins on Tuesday.
The deal includes a sharp cut in US tariffs on Indian goods, from 50% to 18%. It also includes India’s commitment to increase imports from the US by $500 billion and reduce its reliance on Russian oil. Analysts at BofA and Citi believe this agreement could reshape market trends in the coming months.
According to these analysts, the deal removes major downside risks and positions India as a key beneficiary of the global “China” manufacturing shift.
What Does It Mean for Indian Markets?
Market Sentiment and Capital Inflows
Indian equity markets are expected to respond positively, as the deal removes key policy uncertainties. Citi notes that improved sentiment could lead to immediate foreign capital inflows, which may strengthen India’s balance of payments position.
The benefits may extend further. The trade deal could help stabilise the rupee and reduce pressure on domestic interest rates.
A rising stock market may also create a strong wealth effect. This could support the broader economy by boosting urban consumption. Citi suggests that higher investor confidence may lead to increased discretionary spending.
Sectoral Impact and Tariff Reductions
The trade deal is expected to have a wide impact across sectors. BofA highlights that effective tariffs may fall from around 35% to nearly 12–13%. This could provide relief to labour-intensive sectors such as textiles, gems and jewellery, and engineering goods, which have faced growth challenges in recent months.
The agreement also brings clarity to fast-growing sectors like semiconductors and mobile phones. By easing trade for key components, it may support smoother supply chains. Data centres and global capability centres (GCCs) could also benefit, as the deal strengthens protection for India’s service exports and digital infrastructure.
In the energy sector, India is expected to shift away from Russian crude oil toward imports from the US and Venezuela, following the easing of penalties linked to Russian oil, according to BofA.
Economic Outlook
On the economic front, BofA sees upside risks to its FY27 GDP growth forecast of 6.8%, driven largely by the trade deal. While the Reserve Bank of India is likely to keep interest rates unchanged, the agreement offers fiscal breathing room to manage liquidity and support long-term industrial growth.
With concerns around protectionism against India’s service exports largely addressed, the deal could strengthen India’s position as a stable, high-growth player in the global supply chain.
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