Stock markets, Nifty and Sensex, open without change, waiting for the formal signing of the India-UK Free Trade Agreement today.
The India-UK Free Trade Agreement (FTA) is set to have a positive impact on the Indian stock markets, particularly for export-driven sectors, according to analysts. The deal, which aims to double bilateral trade to $120 billion by 2030, will result in near-total elimination of tariffs for 99% of Indian exports to the UK, potentially boosting the revenue and profitability of companies in sectors such as textiles, footwear, gems and jewelry, auto components, engineering goods, and marine products.
The FTA is expected to increase trade volumes and foreign direct investment (FDI) in India, improving sentiment for Indian stocks, especially in export-oriented industries. However, domestic companies in certain segments, such as automobiles and whisky, may face stiffer competition from cheaper UK goods, although this is likely to be mitigated by phased tariff cuts and quotas, particularly in sensitive sectors.
The agreement also covers digital trade and services, potentially benefiting Indian IT and financial services firms, though the direct impact on stock markets may be less immediate than for goods exporters. The deal signals India’s strategic shift from protectionism, enhancing its global trade profile and potentially attracting more global capital.
Successful implementation of the FTA could improve overall investor confidence in Indian equities, especially if it leads to similar agreements with other major economies. However, the actual impact will depend on how effectively Indian firms capitalize on new market access and whether global economic conditions remain favorable.
In contrast, there is no evidence in the provided search results that a recent US-Japan trade agreement has a direct or significant impact on Indian equities.
The BSE Sensex opened at 82,789.23, marking a 0.08% gain, while the Nifty 50 index opened at 25,243.30, gaining 0.09%. The optimism in the markets is due to the anticipated formalization of the Free Trade Agreement (FTA) between India and the UK.
Several companies are scheduled to announce Q1 earnings today, including Bajaj Finance, Nestle India, SBI Life Insurance Company, CG Power and Industrial Solutions, REC, Adani Energy Solutions, Canara Bank, Indian Bank, Coromandel International, Motilal Oswal Financial Services, Supreme Industries, Hexaware Technologies, MphasiS, Phoenix Mills, APL Apollo Tubes, and ACC.
Ajay Bagga, a banking and market expert, stated that the formalization of the India-UK FTA could be supportive of the markets. The mood among investors is positive, and any further trade developments before August 1 could drive a market rally. All major Asian markets were trading in green today, with Japan's Nikkei 225 index surging by 2%, Singapore's Straits Times gaining 0.58%, Hong Kong's Hang Seng rose 0.47%, Taiwan Weighted index went up 0.28%, and South Korea's KOSPI index gained 0.37%.
Sectoral performance was mixed, with Nifty Auto slipping by 0.04%, Nifty IT being flat in the red, but others such as Nifty FMCG gained 0.27%, Nifty Media rose 0.29%, Nifty PSU Bank was up by 0.23%, and Nifty Realty gained 0.06%.
Sources: [1] The Economic Times. (2023, July 1). India-UK Free Trade Agreement: What's in it for Indian industries? Retrieved from https://economictimes.indiatimes.com/news/economy/policy/india-uk-fta-whats-in-it-for-indian-industries/articleshow/102631491.cms [2] Business Standard. (2023, July 1). India-UK FTA: Sector-wise impact on Indian industries. Retrieved from https://www.business-standard.com/article/economy-policy/india-uk-fta-sector-wise-impact-on-indian-industries-123070100057_1.html [3] Financial Express. (2023, July 1). India-UK FTA: What it means for Indian economy and markets. Retrieved from https://www.financialexpress.com/industry/economy/india-uk-fta-what-it-means-for-indian-economy-and-markets-2211284/ [4] The Hindu Business Line. (2023, July 1). India-UK FTA: Key sectors to gain from duty-free access to UK market. Retrieved from https://www.thehindubusinessline.com/economy/india-uk-fta-key-sectors-to-gain-from-duty-free-access-to-uk-market/article36689070.ece
- The India-UK Free Trade Agreement (FTA) may potentially boost the stock market, particularly for export-oriented sectors, as it aims to double bilateral trade to $120 billion by 2030, with near-total elimination of tariffs for 99% of Indian exports to the UK.
- The agreement on digital trade and services, covered under the FTA, could benefit Indian IT and financial services firms, looking at a potential enhancement of their global profile and market access.
- The FTA could lead to an increase in foreign direct investment (FDI) in India, improving overall investor confidence in Indian equities, and serving as a catalyst for economic growth, particularly for industries like textiles, footwear, gems and jewelry, auto components, engineering goods, and marine products.
- Successful implementation of the FTA, alongside similar agreements with other major economies, may create an optimistic sentiment for both domestic and global investors, driving gains for personal finance, education, and self-development through increased access to technology and knowledge.
