London's FTSE 100 rises as UK seals trade deal with India

trade deal

The FTSE 100 index closed at a record high on Thursday, rising 0.9 percent to 9,138.37 points, fuelled by robust corporate earnings and optimism surrounding global trade developments. The rally was driven in part by the announcement of the India–UK Free Trade Agreement (FTA), a landmark deal aimed at boosting bilateral trade and investment.

Several UK-listed companies are expected to be direct beneficiaries of the India–UK FTA, particularly those in the alcoholic beverages, automotive, and consumer goods sectors. Diageo, a global leader in premium spirits and owner of iconic Scotch whisky brands such as Johnnie Walker and Talisker, is set to gain from the steep reduction in Indian import tariffs—from 150 percent to 75 percent, with a gradual decline to 40 percent over the next decade. This opens significant market opportunities for Diageo in India, one of the world’s fastest-growing whisky markets.

Similarly, automotive companies including Jaguar Land Rover (a subsidiary of Tata Motors), Rolls-Royce, Bentley, and McLaren are positioned to benefit from improved access to India’s auto market. Although initial tariffs on petrol and diesel vehicles remain high—up to 50 percent—and quotas start at just 20,000 units, gradual liberalization could unlock long-term gains. Retail-oriented companies like Reckitt and Howden Joinery also saw positive investor sentiment, driven by expectations of stronger bilateral trade in consumer products.

On the other hand, the FTA triggered a wave of selling in Indian liquor stocks, which are now facing the threat of intensified competition from cheaper UK-made imports. Som Distilleries & Breweries dropped 5.3 percent to Rs 125.50, while Radico Khaitan declined by 1.7 to 4 percent, trading in the Rs 2,425–2,449 range. Tilaknagar Industries slipped around 1–2 percent to Rs 278, and United Spirits fell by approximately 0.7 percent.

The FTSE 250, which tracks more domestically-oriented companies, also gained 0.6 percent. Investor sentiment was further bolstered by the recent US–UK Economic Prosperity Deal, signed in May. So far in July, the FTSE 100 has surged over 4 percent in dollar terms, significantly outperforming India’s benchmark indices—the Sensex and Nifty 50—which have declined around 2 percent over the same period. On a year-to-date basis, the FTSE 100 has gained over 20 percent, while the Sensex and Nifty have posted modest gains of just over 4 percent each.

Market participants fear that the tariff cuts on imported Scotch and gin could erode market share and pricing power for domestic premium and super-premium liquor brands. However, some analysts suggest that the growing size of India’s premium spirits market could allow both Indian and UK players to coexist and expand.

The India–UK deal includes nearly Rs 63,000 crore (£6 billion) in investment and export commitments and is designed to enhance trade flows in key sectors such as whisky, automobiles, pharmaceuticals, and machinery from the UK, while allowing Indian exports—textiles, garments, jewellery, footwear, and food products—to become more affordable and competitive in the UK.

Prime Minister Keir Starmer called the FTA “the biggest and most economically significant” trade agreement the UK has signed since Brexit. In a joint statement with Prime Minister Narendra Modi, he described it as one of the most comprehensive deals India has ever entered into.

The agreement also strengthened investor confidence across major FTSE-listed companies such as Lloyds, BT Group, and Reckitt, which reported strong earnings in the same period. Projections estimate the FTA could contribute Rs 51,000 crore (£4.8 billion) annually to the UK’s GDP by 2040, resulting in a permanent uplift of 0.13 percent compared to a no-deal scenario.

(With Inputs from Bloomberg, Reuters & FT news reports)