Stock indices in India remain subdued as Reliance Industries helps alleviate broader market setbacks
India is set to finalise an interim trade deal with the United States this week, aiming to avoid the reimposition of a 26% reciprocal tariff on Indian goods that the Trump administration had announced earlier. The tariff pause, initiated on April 9, is due to expire on July 9, creating urgency for the negotiations currently underway in Washington.
Key aspects of the trade talks include India's firm stance on agricultural concessions, resisting U.S. demands to open its market to apples, tree nuts, genetically modified crops, dairy products, and soya. The U.S. is also pressing for broader market access in sectors like automobiles, whisky, and agricultural products, along with requests to ease regulations on genetically modified foods and dairy production processes. India, in turn, is focusing on securing tariff relief and assurances against future tariffs, particularly in labor-intensive sectors such as textiles, garments, leather goods, chemicals, and footwear. Discussions on rules of origin in textiles are also on the table, with India seeking tariff treatment comparable to other free trade agreement partners.
This interim deal is expected to be among the first of its kind between the U.S. and a major trading partner under the Trump administration's trade agenda. It also represents an initial step toward a broader comprehensive bilateral trade agreement targeting $500 billion in trade by 2025, with the first tranche planned for completion by autumn.
The potential impact on equity benchmarks is positive, with such a trade deal typically seen as reducing tariff barriers, lowering business uncertainties, and potentially boosting export-oriented sectors like textiles and manufacturing. The easing of trade tensions with the U.S.—especially relative to China—could also improve investor sentiment and encourage inflows into Indian equities.
However, some investors may engage in profit booking, potentially capping sharp upside ahead of the U.S. tariff deadline on July 9 and the June-quarter earnings season. The Nifty 50 rose 0.1% to 25,541.80 points, but seven of the 13 major sectors declined on the day.
In other market news, Reliance Industries, the third highest weighted stock on Nifty, rose 1.9%. Meanwhile, Sigachi Industries lost 5.6%, extending Monday's 12% plunge following a deadly fire at its Telangana facility that claimed at least 39 lives. Apollo Hospitals rose 3.5% after unveiling plans to hive off its digital health and pharmacy unit.
Nimesh Chandan, chief investment officer at Bajaj Finserv Asset Management, stated that indications of resolution of global trade uncertainties are a major positive for domestic markets. The MSCI Asia ex-Japan index rose 0.5%, and the BSE Sensex added 0.11% to 83,697.29 points. Financials hit a record high on Friday.
Canada dropped its digital services tax on U.S. tech firms, and the broader small-caps and mid-caps were little changed. The equity benchmarks have eased, with the Financials inching 0.2% lower, easing for the second session.
In conclusion, the impending interim trade deal between India and the U.S. is likely to bolster Indian equity markets by improving trade prospects and investor confidence. However, profit booking may cap some gains ahead of the U.S. tariff deadline and the June-quarter earnings season.
- The Indian equity markets may experience growth, as the impending interim trade deal with the U.S. is expected to improve trade prospects and boost investor confidence.
- The potential impact on equity benchmarks, like the Nifty 50 and BSE Sensex, is positive, with such a trade deal typically seen as reducing tariff barriers, lowering business uncertainties, and potentially boosting export-oriented sectors.
- Nimesh Chandan, the chief investment officer at Bajaj Finserv Asset Management, stated that indications of resolution of global trade uncertainties are a major positive for domestic markets, including the financial sector which hit a record high recently.
- Meanwhile, fire-related incidents, such as the one at Sigachi Industries' Telangana facility, can negatively affect certain stocks, even if the overall market is trending positively, as demonstrated by Sigachi Industries' loss following the tragic incident.
