The US–India trade deal is another development supporting a positive outlook on Indian equities for 2026, BNP Paribas said in a recent note, citing improving macro conditions, policy support and early signs of recovery in earnings momentum.
BNP Paribas said several policy measures taken in 2025 are beginning to show results, including cuts in income tax and GST rates, interest rate reductions by the Reserve Bank of India and improved liquidity conditions. “We are starting to see the benefits reflected in high-frequency economic indicators,” the brokerage said, adding that earnings growth is expected to recover across key sectors.
According to BNP Paribas, sectors such as banks, automobiles and consumer-facing businesses are likely to see a pickup in earnings growth, while IT services earnings have already seen marginal upgrades during the 3QFY26 earnings season. The brokerage said this gradual improvement in earnings visibility adds to its constructive view on Indian equities.
The brokerage also said the Union Budget is supportive of infrastructure spending in FY27, following a period of relatively weak capital expenditure in recent years. In addition, India’s conclusion of trade agreements with both the European Union and the US in January 2026 provides a significant boost to the export outlook. The US and the EU together accounted for about 36 percent of India’s exports in 2024, according to UNCTAD data.
BNP Paribas said Indian exporters are likely to benefit meaningfully from these trade agreements, particularly in labour-intensive sectors such as textiles, gems and jewellery, electronics and transport equipment. It noted that tariffs on Indian goods are now marginally more favourable compared with some Asian peers competing in similar export categories, improving India’s competitive positioning.
An improving export outlook, combined with the potential return of foreign portfolio investor flows, is also expected to support the rupee. BNP Paribas said sectors with higher foreign investor ownership, such as financials and IT services, are likely to benefit the most from a revival in FPI inflows, primarily through valuation multiple expansion rather than a sharp earnings boost.
The brokerage added that when the US had earlier imposed tariffs on Indian exports, there was no material impact on Nifty-50 earnings, and therefore the earnings benefit from tariff reversals is likely to be limited at the index level. However, it said the broader outlook is gradually improving, even if the recovery is not yet broad-based.
Consumption continues to see tailwinds following GST rate cuts, infrastructure spending is expected to recover in FY27, and the outlook for exporters, which had been subdued due to tariff uncertainty, has improved after the trade deals. In IT services, BNP Paribas said the outlook is improving at the margin. Taken together, these factors remain supportive of its positive stance on Indian equities in 2026.
The brokerage also noted that India’s significant underperformance in recent periods has made valuations more attractive, both relative to its own historical averages and compared with other emerging markets
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