Home / Business and Economy / India-US Trade Deal: Market Mood Reset!
India-US Trade Deal: Market Mood Reset!
3 Feb
Summary
- Trade deal resolution has restored policy clarity for investors.
- Rupee is currently undervalued, aiding export competitiveness.
- Large-cap strategy remains preferred over small-caps.
The recent India-US trade deal has effectively reset market sentiment, bringing much-needed policy clarity for investors after a period of turbulence. JPMorgan's Sanjay Mookim highlighted that the resolution provides relief by making Indian industry competitive with an 18% tariff, positioning it favorably against regional peers and supporting manufacturing.
Mookim clarified that while sentiment has improved, this does not immediately signal an earnings upgrade cycle, as investor confidence was the primary strain, not the economy itself. Exports had shown resilience, but a crisis of confidence existed, which the trade resolution addresses.
Currency dynamics further enhance export competitiveness, with the trade-weighted REER decreasing from 105 to 95, indicating the rupee is undervalued. This dual advantage of tariff clarity and a supportive currency creates an optimistic outlook for exporters.
Despite the positive sentiment, Mookim advises caution regarding smaller export-oriented stocks. Large-cap exporters, particularly in IT and pharma, were unaffected by tariffs and will not see incremental benefits. He recommends a large-cap strategy, as earnings breadth may narrow even with steady nominal GDP growth.
