India–US trade deal seen triggering multi-asset relief rally, Emkay says

Indian markets are set for a broad-based relief rally after the India–US trade deal announced late on February 2, with equities, the rupee and short-term rates likely to respond first, Emkay Global Financial Services Ltd said.

The brokerage said the sharp reduction in US tariffs on Indian imports, from 50% to 18%, marks a meaningful easing of external pressure at a time when financial markets had been under stress. The move should improve India’s export competitiveness versus Asian peers and trigger a recovery in shipments to the US, which had fallen sharply after higher tariffs were imposed earlier in the year.

Emkay estimates that India’s exports to the US declined by about $5 billion from the April–June quarter, a significant drag when the current account deficit for that period stood near $12 billion. The tariff rollback is expected to support a turnaround in exports and materially improve the external balance. While India will incur some costs from stopping purchases of Russian crude, the brokerage sees the overall impact on the current account as a net positive.

Currency dynamics are expected to lead the adjustment. The rupee has weakened nearly 3% over the past three months, and Emkay expects a reversal as export flows recover and portfolio inflows resume. A stabilising currency should reduce the Reserve Bank of India’s need to defend the exchange rate, creating room for liquidity injection and faster monetary transmission. Short-term yields are likely to fall first, while longer-dated bond yields may lag due to sustained central and state government borrowing.

Equities are expected to see the strongest reaction. Emkay said a combination of improving earnings momentum, reasonable valuations and a firmer rupee could unlock pent-up foreign portfolio investment. FY27 Nifty earnings are projected to grow about 14% year on year after two weak years, while valuations have corrected to five-year long-term averages, with deeper adjustments in SMID stocks.

Sectoral gains are likely to be concentrated initially. Chemicals, textiles and auto ancillaries stand out as direct beneficiaries of improved access to the US market. Oil marketing companies and Reliance could face some pressure if India fully exits Russian crude purchases. Beyond near-term sector moves, Emkay remains constructive on its core themes of discretionary consumption, SMID banks and NBFCs, and new-age internet companies.

The brokerage maintained its December 2026 Nifty target of 29,000, describing the assessment as a first-cut reaction based on verified announcements, with a more detailed analysis to follow once deal specifics are formally outlined