US-India Trade Deal Announcement Lifts Mood of Foreign Portfolio Investors

The US-India trade deal announcement lifted foreign portfolio investors ( FPIs ) mood significantly on Tuesday. However, experts said that their net purchase of over Rs 5,000 crore should be seen more as a reaction to the positive development rather than a change in stance. “This is not actually a trade deal, but an exchange of tweets. I think the deal is still being worked out and FPIs may not necessarily rush to buy because of a tweet on Truth Social (Donald Trump’s social media handle),” said UR Bhat, co-founder and director of Alphaniti Fintech, adding that the fine print of the deal needs to be looked at. As the fog around the deal blurs keeps the near-term vision, analysts said that FPIs may refrain from making aggressive bets on Indian equities in the near term. Unlike other bilateral free trade agreements, the India-US trade deal is not fully binding agreements, they said. “The trade deal could offer a meaningful sentiment boost to equities; however, a sustainable, broad‑based market recovery will also require earnings rebound,” Namrata Mittal, chief economist at SBI Mutual Fund, said. Recent episodes, such as US tariff threats directed at European nations over the Greenland issue and pressure on Korea to accelerate a trade deal implementation, highlight that exporters and policymakers must remain vigilant when engaging with the US, she added. All eyes will be on earnings growth. “FIIs will substantially reduce their selling and can turn buyers when indications of earnings growth in FY27 become clearer,” VK Vijayakumar, chief investment strategist at Geojit Financial Services , said. While investors can expect decent returns, there is no room for a runaway rally as valuations are high, he added. For FY27, Vijayakumar expects earnings growth of Nifty 50 companies to be 16%, which would be much better than the mid-to-high single digit rise posted over the last 1-2 years. Some experts are also finding it “difficult to digest” US President Donald Trump’s comment that India has committed to buy American goods of up to $500 billion across energy, technology, and agriculture. This is 11 times India’s US imports of around $45 billion in 2025, and analysts and economists said this figure appears to be “too big”, “unreal”, and “a bit challenging” to meet. Late Monday, the US announced that it will lower tariffs on Indian goods to 18% from 25% and also will do away with the additional 25% tariff imposed on India for its Russian crude oil purchases. The trade deal announcement also comes a day after the Indian government’s FY27 Budget, which had failed to bring measures to boost FPI flows to the country and in fact disappointed investors with a hike in securities transactions tax for equity derivatives.