India-US trade deal likely on the horizon: What could a sharp cut in tariffs mean for the Indian stock market? Explain

India-US trade deal: After a grueling few months, the Indian stock market has found its mojo back. And with the possibility of an India-US trade deal looming, analysts believe the “sky is the limit” for the Indian stock market. A report in Mint today stated that New Delhi and Washington are closing in on a long-pending trade deal that could see tariffs on India slashed from a massive 50% to 15-16%. The agreement, according to the report, will be announced later this month during the ASEAN summit between US President Donald Trump and Indian Prime Minister Narendra Modi. What is on the negotiating table? The US now appears ready for a deal with India, driven in particular by China’s hardening stance, according to some experts cited in the report. China’s tighter controls on rare-earth exports and the escalating trade war between the US and China are forcing Washington to build alternative supply chains. Additionally, to facilitate the bilateral trade deal, India is expected to scale back its imports of Russian oil on the energy side, and is considering allowing ethanol imports, with Washington expected to extend concessions on energy trade in return. Currently, Russia accounts for about 34% of India’s crude imports. While around 10% (by value) of the country’s current oil and gas needs are imported from the USA. India is also considering increasing the quota for imports of non-GM maize from the US, in response to rising domestic demand from poultry feed, dairy inputs and ethanol industries. Gift Nifty marks a gap-up start Against the backdrop of an India-US trade deal, the Gift Nifty traded on a firm note today. While the Indian stock market remains closed today (October 22) for Diwali Balipratipada, a gap-up start for tomorrow cannot be ruled out. By 15:40 (IST), Gift Nifty futures were trading nearly 377 points or 1.45% higher at 26,300, signaling a bullish start for the Indian equity market in the October 23 trade. Likely impact of trade deal on Indian stock market Favorable resolution of the India-US trade deal could remove an overhang for the market, analysts believe. Harshal Dasani, Business Head, INVAsset PMS, said the markets have been consolidating within a tight range for over a year, despite India’s strong macros – from the principle India-UK trade deal and a 50-bps rate cut in June, to GST and income tax cuts, and a demand-heavy festive and wedding season ahead. “The only overhang was the India-US trade deal. If Washington moves to cut tariffs to 15-16%, that could be the missing trigger,” opines Dasani. Market veteran Sunil Subramaniam and strategic advisor at BayFort Capital, said if these rumors are true, it could trigger the return of the FIIs. “Then the sky’s the limit.” FIIs have remained on the sidelines of the Indian domestic market this year, turning net sellers of stocks worth ₹147,158 crore year-to-date. After three months of selling, the trend shows a reversal this month as FIIs were net buyers of Indian stocks to the tune of ₹7,362 crore. Kranthi Bathini of Wealthmills Securities opined that if the rates come back to 15–16%, it will also be favorable for the nation and exporters. However, he said that one should not jump on source-based news and wait for clarity. “Earlier too, the narrative kept changing. But this is a positive step. If it materializes, it will be great for the market and for investors,” he added. Dasani sees a fresh bull run on the back of any positive development on the trade front as global risk appetite remains firm and domestic liquidity at record highs. In our view, the Nifty could move towards the 30,000 zone over the next 8-9 months as momentum returns across sectors, he added. Disclaimer: This story is for educational purposes only. The opinions and recommendations expressed are those of individual analysts or brokerage firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.