The India-US trade deal: What it really means for your portfolio

Subho Moulik is the Founder & CEO of Appreciate

• India positions itself as a democratic long term alternative with large consumption potential, while building relationships with the EU, UK, and UAE
• Combination of US and EU deals gives India unprecedented Western market access

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The India-US trade deal triggered a market surge on February 3, with Nifty up 1,220 points, Sensex up 3,657 points intraday, and textile stocks hitting circuit limits. This brought relief to investors that the 11-month tariff overhang had lifted - slashing tariffs from 50% to 18% is straightforward in numbers, but many-faceted in its implications.

The Numbers That Matter

The rupee rallied to 90.29 on Tuesday – its best single-session gain since November 2022. Foreign investors, who had been systematically reducing exposure to the Indian market (over $22 billion in foreign outflows over the past year), are now reassessing. Combined with recent EU and UK trade agreements, this could trigger FPI inflows.

Where the Opportunities Are

Let me put the 50% to 18% tariff reduction in perspective. Every 1% tariff costs India roughly around $1 billion in exports and about 1,00,000 jobs. If the 50% tariff had continued for another year, India would have lost nearly $36-40 billion in exports and 2-4 million jobs. In short, this deal provides economic stability for millions of households.

In the stock market, Textiles lead the change – 28% of India's textile exports go to the US. At 18% tariffs, Indian manufacturers easily gain 1-3 percentage points over competitors. Companies like Gokaldas Exports and Welspun Living saw immediate gains. Engineering goods, gems and jewelry, pharmaceuticals, and specialty chemicals benefit similarly. This is basic margin arithmetic translating into competitive positioning.

But here's what investors miss: There have also been (admittedly somewhat hazy) references to India’s investments into the US, with potential talk of India committing to purchase ~$500 billion in US goods – energy, technology, agricultural products, over the next decade. A majority of global leaders in these sectors are largely US-listed companies. Whether semiconductors, defence, quantum computing, or AI infrastructure, leading players in these sectors trade on US exchanges, and they added $500 billion in fuzzy revenue forecasts. If you believe in these commitments (and similar commitments from EU, SE Asia, etc), following through, you should look at portfolio diversification through listed investments in these US sectors.

Strategic Shifts Underway

This deal came one week after India's EU agreement, covering 2 billion people and a quarter of global GDP. India is executing deliberate diversification – textbook risk management at the national level. As the US "de-risks" from China, India positions itself as a democratic long-term alternative with large consumption potential, while building relationships with the EU, UK, and UAE.

This is also the time to call out a longer-term strategic shift I see happening, which would give India more leverage in a future trade negotiation. It is time for Indian retail investors to become providers and owners of capital on US bourses – increasingly establishing a voice on the boards and committees in listed US blue chip companies – driving a closer India-US alignment not just through government dialogue but also through influence of the key private lobbies that drive US trade priorities.

What Investors Should Do

Investment decisions are not about chasing a one-day or one-week rally – they’re about recognizing structural shifts. The combination of US and EU deals gives India unprecedented Western market access. Indian markets should benefit in the short term, though long term Indian portfolio appreciation is still dependent on earnings growth and moderating forward earnings multiples.

Similar to India’s trade portfolio, where diversification is a must, diversification is also a must for your personal investment portfolio.

A 70:30 India:US portfolio allocation split provides home market familiarity plus access to AI infrastructure, defence technology, and quantum computing themes unavailable domestically. You can start with global ETFs if stock selection feels daunting. Focus on systematic investing, not timing. Most importantly, focus on fundamentals, not tips – whether investing in India or abroad. The India-US trade deal may or may not sustain a prolonged bull run. But the case for global diversification of your portfolio is one that keeps on getting stronger and stronger!

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.