India-US trade deal: What can the Indian stock market expect ahead of Trump's tariff pause deadline?

Mint

2 days ago

India-US trade deal: As the deadline for the 90-day pause on tariffs announced by US President Donald Trump looms, investors have mostly stuck to the sidelines not just in India, but globally. The Indian stock market has entered a consolidation mode amid a lack of clarity, declining 0.7% for the week.
Commerce Minister Piyush Goyal has strongly indicated that India will not enter any trade deal under pressure, only once it is "fully finalised, properly concluded and in the national interest".
July 9 marks the end of the 90-day suspension period of the Trump tariffs imposed on dozens of countries, including India. An additional import duty of 26% was announced on Indian goods.
As per a PTI report, an official said that the Indian team has returned from Washington after holding talks with the US on an interim trade pact but discussions will continue as certain issues in the agri and auto sectors still need to be resolved. India has raised issues over 25% duty in the auto sector and 50% duty on steel and aluminium goods, according to the reports.
"The Indian equity market is viewing the US–India trade talks with growing optimism, as signals from both sides suggest a deal is within reach. The temporary pause on tariffs by the US and constructive dialogue has boosted confidence that a resolution will emerge before the July 9 deadline," said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group.
The sectors that are likely to gain in case of a favourable trade deal are IT, pharma, auto components, electronics and textile, opined experts.
A breakthrough would be a significant positive for India's export sectors—particularly IT, pharmaceuticals, and auto components—and could reinforce foreign investor interest in Indian equities, Hajra added.
Meanwhile, Harshal Dasani, Business Head at INVasset PMS believes that textiles, pharmaceuticals, and electronics are likely to see substantial benefits from tariff reductions and improved market access.
However, challenges remain in the agriculture and dairy sectors, which may be impacted by the existing tariff structures, he added.
India's textile exports to the US, valued at approximately $9.7 billion in 2023, could grow further with favourable trade terms. Similarly, the pharmaceutical sector, which supplies around 31% of its exports to the U.S. (approximately $8 billion), stands to gain significantly from expanded access. The electronics sector has also experienced strong growth, with exports to the US exceeding $6.6 billion in 2023 alone.
"Additionally, the trade deal could enhance foreign direct investment (FDI) inflows, which saw a 14% increase in FY 2024–25, with the services sector being a key recipient. The potential for increased market access and stronger trade ties would position India as a more attractive investment destination," Dasani added.
A positive trade deal could boost foreign investor confidence further, leading to enhanced capital inflows and a stronger Indian Rupee.
However, on the flip side, if the deal falls short of expectations, short-term market volatility could ensue. "Export-driven sectors, particularly textiles and pharmaceuticals, might face hurdles due to unresolved tariff issues," Dasani said. He also believes that any geopolitical tensions stemming from the deal's terms could create uncertainty in global markets, potentially dampening investor sentiment.
Against this backdrop, Nitin Jain, Senior Research Analyst at Bonanza, advised investors to adopt a defensive position, concentrating on domestic-focused industries such as banking and FMCG which are less affected by global fluctuations.
"Investors should exercise caution regarding industries associated with global supply chains, such as metals and capital goods. Utilizing gold-linked ETFs or defensive investments can assist in reducing volatility. A brief correction could present long-term purchasing chances in high-quality Indian stocks, as the economy continues to show fundamental strength," Jain added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.