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India-US Trade Deal: Storm or Sunshine for Markets?
9 Feb
Summary
- India-US trade deal removes major uncertainty, easing investor sentiment.
- Budget increases infra capex, focusing on roads, railways, and defense.
- AI disruption fears hit IT stocks despite positive budget and trade news.
India's financial markets experienced a mixed week, beginning with optimism from a growth-oriented budget and the India-US trade deal, but later facing headwinds from global AI disruption fears impacting IT stocks. The Union Budget for 2026-27 boosted capital expenditure, particularly in transport infrastructure, defense, and energy, aiming to foster public investment-led growth.
The India-US trade agreement has significantly reduced trade frictions and removed a key source of uncertainty that had weighed on investor sentiment. The US has reduced punitive duties on Indian oil trade, while tariffs on certain other sectors have been adjusted. India has also committed to substantial purchases of US goods over five years.
However, the IT sector faced a sharp sell-off following a global slump, driven by updated AI technologies that could disrupt traditional software and services models. Fears of AI-driven automation impacting even complex projects have led to significant declines in Indian IT stocks.
Market experts suggest that while the budget and trade deals provide a strong foundation, sustainable rallies will depend on corporate earnings delivery. The increased Securities Transaction Tax (STT) on derivatives is seen as a measure to curb retail speculation, with most experts advising a selective approach to investing amidst these evolving market dynamics.
