Stock Markets Showing Subdued Start due to Trade Deal Concerns
In the evolving landscape of international trade, the US-India dialogue has taken an unexpected turn, potentially reshaping bilateral ties and regional geopolitics. The Indian government is currently exploring possible trade concessions for the upcoming talks at the end of the month.
This shift in focus from strategic defence cooperation to contentious issues like trade barriers, immigration policies, energy, and market access has raised tensions between the two nations [1].
In the domestic sphere, Indian oil refiners have already started reducing purchases from Russia, possibly signalling an attempt to accommodate US concerns and improve trade negotiations with Washington [1].
The ongoing trade discussions have significant implications for Indian shares and companies such as Larsen & Toubro (L&T) and Bank of India. A positive resolution or progress in trade talks could boost investor sentiment, potentially benefiting diversified industrial firms like L&T, which rely on US market access, technology partnerships, and a favourable trade environment [1].
Banks like Bank of India might also indirectly benefit from improved business confidence, higher corporate investment, and increased cross-border financial activity due to better trade relations. Conversely, escalation or a breakdown in talks may introduce market uncertainty or affect specific sectors exposed to US trade policies, which could negatively impact stock valuations of these companies [1].
The market impact on Indian shares will depend on the final trade deal terms and how they influence sectors related to trade, infrastructure, and financial services. Investors are closely monitoring these talks, given their potential to influence India’s foreign investment climate and economic growth trajectory [1].
Meanwhile, the rupee fell by 15 paise to close at 86.82 against the dollar, marking its lowest level in over four months [2]. The Dow Jones Industrial Average shed half a percent, the tech-heavy Nasdaq Composite gave up 0.4 percent, and the S&P 500 eased 0.3 percent, ending a six-day rally [3].
Asian markets were mixed this morning after the US and China ended two days of 'constructive' talks in Stockholm without any breakthrough [4]. European stocks closed higher on Tuesday as investors assessed a slew of corporate earnings and the US-EU trade deal [5]. Overnight, U.S. stocks ended slightly lower due to weak earnings from UnitedHealth, Boeing, Merck, and UPS [6].
In India, the benchmark indexes Sensex and Nifty reversed early losses to end up around 0.6 percent each on Tuesday [7]. Indian shares may open on a tepid note on Wednesday due to trade talks with the United States and earnings from Larsen & Toubro and Bank of India [8].
On the economic front, PNB, Tata Steel, and IndiGo will publish their quarterly earnings results today [9]. The world economy is expected to expand at a slightly faster pace than what the IMF predicted in April [10]. The International Monetary Fund (IMF) has upgraded its growth forecasts for India to 6.4 percent for both 2025-26 and 2026-27 [11].
A new pharmaceutical policy is expected to be announced within the next two weeks, and it is expected to be more stringent than before [12]. However, no new facts were provided about the pharmaceutical policy or the IMF's growth forecasts for India.
[1] Source: Reuters [2] Source: Bloomberg [3] Source: CNBC [4] Source: Reuters [5] Source: Reuters [6] Source: CNBC [7] Source: Business Standard [8] Source: Economic Times [9] Source: Moneycontrol [10] Source: IMF [11] Source: IMF [12] Source: Pharmabiz
- The ongoing US-India dialogue, focusing on trade concessions, has the potential to significantly impact India's business landscape, particularly in sectors like energy, infrastructure, and financial services.
- The discussions between the US and India on trade barriers could influence the personal-finance sector, as improvements in trade relations could boost investor sentiment, benefiting companies such as Larsen & Toubro (L&T) and Bank of India.
- The tech industry could respond to the general-news developments in US-India trade talks, as positive resolution or progress may institutionalize technology partnerships and favorable trade environments.
- Sports news in India may indirectly be affected if market uncertainty arises from the escalation or breakdown of US-India trade talks, potentially negatively impacting stock valuations of Indian companies.
