India-US trade deal impact: IT, auto stocks jump up to 10%, indices surge 6%; here's why

India-US trade deal impact: IT, auto stocks jump up to 10%, indices surge 6%; here’s why

• Indian IT and auto stocks surged after India-US trade deal announcement
• Nifty IT index rose nearly 6 percent, Nifty Auto index jumped over 5 percent
• US cuts reciprocal tariff from 25% to 18% after Modi-Trump talks

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The shares of Indian IT and auto companies jumped in trade on February 3 after India and US concluded their much-awaited trade deal, boosting stock markets.

The sharp rise in the share prices pushed the Nifty IT index up nearly 6 percent to 40,301.4 in the early trading hours of Tuesday. Nifty Auto index meanwhile surged more than 5 percent to 28,095.85.

India-US trade deal:

"Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25 percent to 18 percent," Trump wrote in a post on Truth Social after a telephonic conversation with Prime Minister Narendra Modi.

Trump described Modi as “one of my greatest friends” and a “powerful and respected leader of his country,” adding that the two leaders discussed trade, global security and efforts to end the Russia Ukraine war.

"Key sectors that can benefit include textiles and apparel, auto ancillaries and engineering, specialty chemicals, agro and seafood exports, and select electronics and consumer manufacturers with US exposure," said Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS.

Why are IT stocks rising today?

While the Trump tariffs did not directly impact the IT companies, the souring relations between the two countries bore an impact on the firms. The trade deal, implying better relations between India and US, may have boosted the shares of the IT companies, who derive a major portion of their revenue from the American market.

IT sector was considered one of the beneficiaries of the India-U.S. trade agreement.

Persistent Systems and Mphasis shares jumped nearly 8 percent, while heavyweight Infosys, HCL Technologies and Tata Consultancy Services (TCS) shares surged more than 6 percent each.

Wipro and Tech Mahindra shares rallied over 7 percent each, while Coforge and LTIMindtree shares gained more than 5 percent each.

Why are auto and auto ancillary stocks rising today?

Jefferies said that the key beneficiaries of the India-US trade deal includes auto ancillaries with meaningful exposure to the U.S. such as Sona BLW Precision Forgings. The shares of the company jumped 10 percent to trade at Rs 549.45 apiece.

Bharat Forge and Samvardhana Motherson shares gained nearly 10 percent each, while Tube Investments of India shares gained around 8 percent. UNO Minda shares rose around 6 percent.

The shares of automakers like Mahindra & Mahindra, Tata Motors PV, Bajaj Auto, Eicher Motors, TVS Motors, Maruti Suzuki and others gained up to 3 percent.

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