After India and the US finalized their eagerly anticipated trade agreement on February 3, shares of Indian IT and automotive companies surged in trading, lifting stock markets.
Market Reaction to the India-US Trade Agreement
The Nifty IT index increased by about 6% to 40,301.4 in the early trading hours of Tuesday due to the significant increase in share prices. In the meantime, the Nifty Auto index rose more than 5% to 28,095.85.
📈 India-US Trade Deal Market Impact
- Nifty IT Index: Up nearly 6% to 40,301.4
- Nifty Auto Index: Rose over 5% to 28,095.85
- Market Trigger: India-US trade agreement
- Investor Mood: Strongly positive
- Key Drivers: Tariff reduction, improved relations
“We agreed to a trade deal between the United States and India out of goodwill and respect for Prime Minister Modi, as well as per his request, effective immediately,
after speaking with Prime Minister Narendra Modi over the phone, whereby the United States will impose a lesser reciprocal tariff, reducing it from 25 percent to 18 percent,” Trump posted on Truth Social.
Leaders’ Remarks and Strategic Discussions
The two leaders talked about trade, international security, and efforts to put an end to the Russia-Ukraine conflict, according to Trump, who called Modi “one of my greatest friends” and a “strong and respected leader of his country.”
According to Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, “key sectors that can benefit include textiles and apparel, auto ancillaries and engineering, specialty chemicals, agricultural and seafood exports, and select electronics and consumer businesses with US exposure.”
Why IT Stocks Benefited from the Trade Deal
The deteriorating ties between the two nations had an effect on the IT companies even though the Trump tariffs had no direct effect on them. The trade agreement, which suggests improved ties between the US and India, might have increased the stock of IT firms, whose main source of income is the US market.
The trade agreement between the United States and India was thought to benefit the IT sector. Shares of heavyweights Infosys, HCL Technologies, and Tata Consultancy Services (TCS) increased by more than 6% each, while Persistent Systems and Mphasis shares increased by around 8%.
Shares of Coforge and LTIMindtree increased by more than 5%, while shares of Wipro and Tech Mahindra increased by more than 7%.
🚗 Auto & Auto Ancillary Stock Rally
- Top Gainer: Sona BLW Precision Forgings (+10%)
- Strong Performers: Bharat Forge, Samvardhana Motherson
- Mid Gains: Tube Investments of India, UNO Minda
- Sector Impact: Auto ancillaries with US exposure
- Broker View: Jefferies bullish on beneficiaries
Auto and Auto-Ancillary Stock Performance
According to Jefferies, car ancillaries with significant exposure to the US, including Sona BLW Precision Forgings, are among the main beneficiaries of the India-US trade agreement. The company’s shares increased by 10% to trade at Rs 549.45 per.
Shares of Samvardhana Motherson and Bharat Forge both increased by around 10%, while shares of Tube Investments of India increased by almost 8%. Shares of UNO Minda increased by almost 6%.
Mahindra & Mahindra, Tata Motors PV, Bajaj Auto, Eicher Motors, TVS Motors, Maruti Suzuki, and other automakers saw their shares increase by up to 3%.
Frequently Asked Questions
1. Why did the US-India trade agreement cause IT and auto stocks to soar?
Investor confidence increased as a result of the trade agreement’s reduction of reciprocal tariffs and enhancement of bilateral ties, particularly in industries like IT services and car ancillaries that have significant exposure to the US market.
2. Which indices gained the most from the trade deal?
Due to substantial purchasing activity in these sectors, the Nifty IT index gained almost 6% and the Nifty Auto index jumped more than 5%.
3. Which IT stocks had the largest increases in value?
While Infosys, HCL Technologies, TCS, Wipro, and Tech Mahindra had gains of 6–7%, Persistent Systems and Mphasis saw gains of about 8%.
4. What was the reaction of auto and auto-ancillary stocks?
Major automakers had gains of up to 3%, while auto ancillary firms such as Sona BLW Precision Forgings, Bharat Forge, and Samvardhana Motherson saw increases of up to 10%.
5. Which industries stand to gain the most from the trade agreement between the US and India?
The industries most likely to gain are IT services, auto ancillaries, textiles, engineering, specialized chemicals, exports of seafood and agricultural products, and a few electronics makers.
Conclusion
Particularly for IT and auto-related equities with substantial exposure to the US economy, the India-US trade agreement has proven to be a powerful positive catalyst for Indian equity markets.
Investor mood has significantly increased due to lower tariffs, stronger diplomatic relations, and anticipations of more seamless trade flows. In the near term, the rise in these sectors may gain more traction if the agreement results in consistent policy backing and solid bilateral ties, which would improve India’s standing in international manufacturing and commerce.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Market investments are subject to risks. Readers are advised to consult a qualified financial advisor before making any investment decisions.
