US President Donald Trump’s latest update on India-US trade negotiations is expected to influence Indian stock market sentiment, as US tariffs on Indian goods have been one of the key reasons behind the subdued performance of Indian equities in recent months.
The Sensex and the Nifty 50 tarded about half a per cent higher in early deals on Wednesday (September 10).
On Tuesday (US local time), Trump said that India and the US “are continuing negotiations to address the trade barriers between the two nations,” a statement that indicates a thaw in strained relations between New Delhi and Washington after the US President imposed a 50% tariff on Indian goods as punishment for New Delhi’s purchase of Russian oil.
Trump posted an update on India-US trade talks on Truth Social: “I look forward to speaking with my very good friend, Prime Minister Modi, in the upcoming weeks. I feel certain that there will be no difficulty in coming to a successful conclusion for both of our great countries.”
Prime Minister Narendra Modi responded to Trump’s update on social platform X, highlighting India’s close ties with the US.
“India and the US are close friends and natural partners. I am confident that our trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership. Our teams are working to conclude these discussions at the earliest. I am also looking forward to speaking with President Trump. We will work together to secure a brighter, more prosperous future for both our people,” PM Modi wrote on X.
What Trump’s latest update means for the Indian stock market
Trump’s signals on India-US trade negotiations have rekindled hopes of an early trade deal between the two nations and further strengthened expectations that the 25 per cent additional tariffs on Indian exports to the US can be abolished. This will be a huge relief for affected sectors such as textiles, gems and jewellery, certain food items, and electronics.
However, it could be too early to expect a decisive rally in the Indian stock market as there are mixed signals on the front of India-US trade relations.
According to media reports, Trump on Tuesday urged European Union (EU) officials to hit China and India with tariffs of up to 100 per cent in a bid to pressure Russian President Vladimir Putin to end the war in Ukraine.
“Market should focus on Trump’s actions, not words,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Vijayakumar underscored that Trump appears to have taken a somewhat defensive stance after the Shanghai Cooperation Organisation (SCO) meeting.
He believes the additional 25 per cent tariffs are unlikely to stay for long, and the remaining 25 per cent tariff is not expected to have a major negative impact on India. Ideally, US tariffs on Indian goods should be reduced to around 20 per cent, said Vijayakumar.
The major trigger for the market will be an earnings recovery, which would justify its stretched valuations. Experts expect earnings to pick up from the December quarter, supported by domestic reforms, rate cuts, and easing global uncertainties.
Market veteran Ajay Bagga, in his post on LinkedIn, emphasised that the Indian stock market will need earnings strength to sustainably surpass the September 2024 record high.
“Trump’s post is a positive, a follow-through of a trade deal will be a very positive catalyst for Indian markets, but earnings rising to justify the lofty valuations is the essential catalyst,” Bagga wrote.
“The Indian stock market has spent nearly 12 months with no returns, and the turn is imminent. But to make it a stable move, incipient earnings recovery is an essential factor. June may have been the earnings trough, and we may be on the cusp of an earnings recovery setting in,” wrote Bagga.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
