US-India trade deal lifts sentiment, could set stage for IPO revival

IPO

• India-US trade deal boosts market sentiment and Sensex jumps 3 percent
• Export-oriented sectors expected to benefit from improved US market access
• Deal may revive IPO activity after a slow January and attract foreign investors

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By easing trade-related uncertainty and improving the earnings outlook, the India-US trade agreement is likely to help revive risk appetite at a time when the country's primary market has struggled to regain momentum after a hectic 2025.

Equity markets have responded positively, with investors reading the deal as a reduction in external risks and a signal of policy stability. The benchmark Sensex opened trading on February 3 with a three percent jump, night after Prime Minister Narendra Modi and US President Donald Trump said a deal had been agreed to.

According to Axis Securities, the agreement enhances earnings visibility, supports valuation re-rating, particularly for export-oriented and capex-linked sectors and reinforces India’s position as a relatively safe haven among emerging markets.

The brokerage sees the deal not as a short-term trigger but as a medium-term structural positive that could improve India’s export competitiveness, deepen manufacturing capabilities and strengthen global integration if execution remains consistent.

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This shift in sentiment matters for the IPO market, which is highly sensitive to secondary market conditions, foreign investor participation and valuation comfort.

After a strong September-to-December period, which saw 54 IPOs raise more than Rs 1 lakh crore, January 2026 saw just three mainboard IPOs, as issuers and bankers turned cautious amid valuation fatigue, volatile global cues and persistent foreign portfolio investor outflows. Several deals were pushed to the back burner as investors demanded sharper pricing discipline and clearer visibility on macro risks.

However, market participants now believe the India-US trade deal could act as a turning point.

Investment bankers tracking deal pipelines said optimism has improved, with expectations that better sentiment could revive stalled IPO plans. “Yes, we are optimistic on the deal pipeline," said a senior investment banker at a Mumbai-based capital markets focused investment bank, adding if foreign institutional investors come back in a significant way then there could be a revival of animal spirits in the IPO market.

A capital markets lawyer, who spoke on the condition of anonymity, said a number of good-quality issues were languishing due to weak sentiment and the trade agreement would provide a positive signal. He, however, cautioned that the real test will be how markets behave over the next few weeks, particularly whether foreign investors return in a sustained manner.

Net-sales of equities by foreign institutional investors in 2025 stood at approximately Rs 1.66 lakh crore.

Axis Securities said export-oriented sectors with significant US exposure are likely to be key beneficiaries of the improved sentiment in the stock market.

Textiles, chemicals, pharmaceuticals, auto ancillaries, IT services and select industrial companies stand to gain from improved market access, tariff rationalisation and greater supply-chain certainty. Over time, higher order inflows, better capacity utilisation and stronger earnings visibility in these sectors could support sustained growth and valuation re-rating, the brokerage said.

For the primary market, this combination of improved sentiment, potential revival in FII flows and more defensible valuations could reopen the fundraising window that largely stayed shut in January. With a healthy pipeline of companies already cleared or close to regulatory approvals, even a modest improvement in market conditions could translate into a meaningful pickup in deal activity.