Global brokerages say India-US trade deal eases FPI worries, improves near-term market sentiment

Bernstein said the signing of the trade treaty could support a short-term rebound in Indian equities following the recent market correction, driven mainly by improved sentiment rather than changes in earnings expectations.

• US-India trade deal cuts tariffs, easing risks for Indian markets and exporters
• India to import $500 billion in US goods over five years under the agreement
• Deal boosts FPI sentiment, but brokerages remain cautious on medium-term outlook

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The India-US trade deal announced by US President Donald Trump during the late hours on February 2, is expected to ease tariff-related risks for Indian markets, with global brokerages saying the agreement removes a key overhang that had weighed on sentiment and foreign portfolio investor (FPI) positioning.

Under the deal, the US will roll back penalties imposed on India for importing Russian crude oil and reduce overall tariffs on Indian exports to 18 percent. India, in turn, will lower tariffs on US goods to zero and commit to importing $500 billion worth of US energy, technology, agricultural and coal products over five years.

Global brokerages said the agreement could improve India’s export competitiveness and reduces downside risks, even as most remain cautious on the medium-term earnings outlook.

Jefferies highlights easing of FPI overhang

Jefferies said the trade deal addresses a major top-down concern for foreign portfolio investors, who remain meaningfully underweight India compared with emerging market benchmarks. Tariff uncertainty since September 2025 had hurt India’s relative attractiveness, particularly versus export-oriented Asian peers.

With tariffs on Indian goods now lower than or broadly in line with competitors such as Pakistan and Vietnam in labour-intensive segments, Jefferies said the deal improves India’s positioning and reduces the risk of further FPI outflows. However, it added that the agreement is more likely to stabilise FPI positioning than lead to an immediate surge in inflows.

Bernstein sees near-term rebound, stays neutral

Bernstein said the signing of the trade treaty could support a short-term rebound in Indian equities following the recent market correction, driven mainly by improved sentiment rather than changes in earnings expectations.

The brokerage expects the Nifty to retrace towards the 26,500 level in the near term, but maintained its neutral stance and unchanged year-end target of 28,100, citing ongoing policy uncertainty and limited visibility on earnings upgrades.

Effective tariffs may fall sharply: BofA

BofA Securities said the rollback of Russian oil-related penalties and reciprocal tariffs could reduce India’s effective tariff rate to around 12–13 percent, down from nearly 30–35 percent earlier, even after accounting for section 232 tariffs remaining in place.

The brokerage said this would provide meaningful relief to labour-intensive export sectors such as textiles, gems and jewellery, agricultural products and engineering goods. It also flagged potential upside risks to India’s FY27 GDP growth forecast of 6.8 percent, supported by improving high-frequency indicators.

BofA Securities also said the improvement in growth certainty reduces the need for further monetary easing. It revised its call for a rate cut at the Reserve Bank of India’s upcoming policy meeting to a hold, though it expects the RBI to continue supporting liquidity to ensure smooth transmission of past cuts.

Manufacturing exporters gain clarity

JPMorgan said the deal removes uncertainty that had delayed export plans for electronics manufacturing services companies with high exposure to the US. Companies such as Cyient DLM, Avalon and Syrma are expected to benefit as clients move out of a wait-and-watch mode.

Positive for Indian markets

BNP Paribas said the trade deal adds to recent positives for Indian markets, including tax cuts, easier financial conditions and improving liquidity. While the direct impact on benchmark earnings may be limited, it expects benefits through better confidence and lower downside risks, particularly for FPI-sensitive sectors such as financials and IT.

Overall, global brokerages see the India-US trade deal as confidence-positive and risk-reducing, especially for FPIs, rather than a trigger for a broad-based market re-rating.