India, US trade deal not priced in yet; can bring back FII flows: Analysts

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Indian equity markets have not yet priced in the potential trade deal with the US, analysts said, adding that a confirmed trade deal could serve as a major catalyst for the benchmark indices. The deal, they believe, could bring back foreign institutional investor (FII) flows back into the Indian stock markets. 

"The market is still waiting. There remains considerable uncertainty around the timeline of the trade deal, whether it happens this month, next month, or later,” according to Sanjeev Hota, Director-Head of Equities Strategy at Standard Chartered Securities India. “Once we get a concrete timeline, it will act as a strong trigger for market sentiment, not just for domestic investors but also for FIIs.” 

US President Donald Trump indicated that Washington and New Delhi are nearing a new trade agreement, adding that tariffs imposed on India may be lowered in due course. "We’re working on a deal with India, a very different one from before. They don’t love me right now, but they will again. We’re getting a fair deal," Trump said. 

Earlier this year, Trump imposed higher tariffs, up to 50 per cent, on Indian exports to the US, to pressure New Delhi to curb its purchases of Russian oil. 

After several false starts around the much-anticipated trade deal, markets are now waiting for an official announcement and clear contours before reacting, said Ajay Bodke, independent market analyst. Despite statements, including Trump’s remarks that the deal is imminent, investors are cautious and the market will wait for the actual announcement before taking a directional call, he noted.

 

So far in 2025, the Nifty and the 30-stock Sensex have failed to hit new peaks this year and are up 7.7 per cent and 6.6 per cent, respectively.

Corporate earnings key

Bodke expects a short-term relief rally once the deal is announced, but said the sustainability of the rally will depend on broader global and domestic factors. “The most important factor will be the revival in corporate earnings. Earnings seem to have bottomed out, and as we move into the second half of the financial year, the momentum is likely to pick up,” he said.

 

Hota noted that while the macroeconomic impact of the trade deal may not be significant, the sentiment boost could be substantial for markets. He said that multiple triggers are emerging for the Indian market. “Earnings are showing signs of strong recovery. This fiscal could see double-digit earnings growth, around 10 per cent, with potential for further improvement over the next two years. Macros are supportive, policy direction is pro-growth, and structural reforms such as the GST 2.0 regime are in place.”

 

Recent upgrades by global brokerages such as HSBC and Goldman Sachs, which have turned overweight on India, suggest the tide is turning, analysts said. Morgan Stanley, too, has set a June 2026 target of 100,000 for the Sensex as their bull-case scenario, a part of which is attributed to the India, US deal coming through. 

Goldman Sachs sees a case for India to perform better next year, with growth-supportive policies, earnings revival, supportive positioning and defensible valuations. The US-based brokerage has upgraded the domestic market to 'overweight' and has set a Nifty target of 29,000.