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Bernstein says details released so far are broadly positive for Indian equities, with meaningful gains expected for auto components and protection for pharma from downside risks.
PM Modi and US President Donald Trump. (File Photo: Reuters)
The announcement of an interim India-US trade deal framework has lifted market sentiment, but brokerages said the fine print of the agreement will explain its tangible benefits for India.
Brokerage firm Bernstein said the details released so far are broadly positive for Indian equities, with meaningful gains expected for auto components and protection for the pharmaceutical sector from potential downside risks.
“The economic costs of switching to far-off crude suppliers will be outweighed by tariff benefits,” Bernstein said, referring to the removal of the additional 25% Russian oil-related duty that had weighed on Indian exports.
Despite recent market volatility, the brokerage has retained its year-end Nifty target, implying a 9.5% upside from current levels. “Given the recent correction, we maintain our target, though risks remain as this is a framework agreement and not a full-fledged bilateral trade agreement (BTA),” it added.
JM Financial also termed the agreement a clear sentiment positive, particularly for export-oriented sectors, though it cautioned that elevated absolute valuations could slow the pace of incremental foreign inflows.
“The reduction in effective tariffs and removal of punitive duties should support a rebound in India’s trade surplus with the US after the FY26 year-to-date deterioration caused by higher tariffs,” JM Financial said.
Improved export flows are expected to boost dollar inflows, support the balance of payments, and lend a marginal appreciation bias to the rupee. From a macro perspective, the brokerage said India’s external position improves relative to several Asian emerging market peers that continue to face higher effective US tariffs.
Auto components among biggest beneficiaries
Brokerages broadly agree that the auto components sector is one of the biggest beneficiaries of the framework. Bernstein highlighted the importance of changes related to Section 232 tariffs, which cover aluminium and steel.
“India will receive a preferential tariff quota on auto parts. This is significant as it effectively removes or reduces the 25 per cent tariffs on auto components, which were otherwise excluded from reciprocal tariff measures,” Bernstein said, adding that the exact quota details are yet to be disclosed.
Electronics exports remain largely unaffected, having benefited from exemptions even under earlier tariff regimes. Other sectors expected to benefit include diamonds and jewellery, textiles, machinery, chemicals and automobiles, where tariff reductions materially enhance competitiveness. Pharmaceuticals and aircraft components continue to enjoy near-zero duty access.
Conditional positives, policy risks remain
In a note titled ‘India-US trade: Clarity improves, positives deepen, but conditional’, PL Capital said the joint statement released on February 6 sets the base for a broader trade agreement but carries explicit conditions.
“The US and India on 6th Feb’26 released a joint statement announcing a framework for an Interim Trade Agreement (ITA), which will be negotiated as the first step toward a broader Bilateral Trade Agreement (BTA),” PL Capital said.
Under the framework, the US will apply an 18% reciprocal tariff on select Indian goods while outlining the potential removal of reciprocal tariffs on a wider set of products. Indian exports will receive a preferential tariff rate quota for automotive parts and tariff removals on specific aircraft components. In return, the US gains tariff cuts across several sectors and long-term purchase commitments from India.
What has changed since the initial social media announcements by Trump and Modi? PL Capital said that listing the legal withdrawal of the additional 25% duty, India’s commitment to cease Russian oil imports, selective — rather than blanket — tariff liberalisation, and improved near-term trade visibility.
PL Capital also flagged that the framework includes an explicit monitoring mechanism allowing the US to re-impose duties if commitments are breached. “Trade policy under the current US administration remains closely intertwined with geopolitical considerations,” it cautioned.
Ministerial clarity eases domestic concerns
Commerce Minister Piyush Goyal has clarified that India has not agreed to blanket zero tariffs on US imports. Concessions are selective and calibrated, with explicit protection for sensitive agricultural, dairy, MSME, handloom and handicraft sectors.
Brokerages said this approach balances export competitiveness while safeguarding politically sensitive domestic industries.
Overall, while the interim trade framework falls short of a full bilateral agreement, analysts said it provides improved visibility, reduces immediate tariff risks, and strengthens India’s relative macro position — making it a clear, if conditional, positive for markets.
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February 09, 2026, 10:35 IST
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