India-EU trade deal: How will it impact various stocks, sectors?
What's the story
After nearly two decades of negotiations, India and the European Union (EU) have reached a major trade agreement. The deal was announced by Prime Minister Narendra Modi today. It will allow India to open its vast, previously protected market for free trade with the EU's 27 member states. This is expected to create huge opportunities for India's 1.4 billion people as well as millions in Europe. Let's find out the impact on various stocks and sectors.
Tariff reduction
Trade deal aims to reduce tariffs on 90% of goods
The India-EU trade deal seeks to eliminate tariffs on 90% of EU goods, including pharmaceuticals, machinery, and chemicals. A proposal has been made to impose zero tariffs on iron and steel products as well as a quota of 250,000 vehicles per year. The agreement also addresses high tariffs on EU agricultural food products such as wine (20%-30%), spirits (40%), and beer (50%).
Beneficial sectors
Sectors likely to benefit from the trade deal
According to Tushar Badjate, Director at Badjate Stock & Shares Pvt Ltd, textiles, apparel, leather, pharmaceuticals, engineering goods, and IT services are likely to benefit from this deal. He said these sectors could see improved competitiveness due to lower EU tariffs and smoother compliance. For Europe, automobiles, luxury goods, machinery, chemicals, and clean-tech could gain access to one of the world's fastest-growing consumer markets.
Challenges ahead
Potential challenges and market response
However, Badjate warned that Indian auto dairy and select MSME segments could face competition from cheaper European imports. He also cautioned about carbon norms and non-tariff barriers from the EU which could limit exporters' upside potential. Market analysts have identified stocks that are likely to benefit from the India-EU agreement as well as those that may be adversely affected by it.
Market impact
Stocks to watch under India-EU trade deal
Among the stocks likely to benefit from the deal are auto ancillaries such as Motherson, Bharat Forge and Sona BLW. These companies could see volume growth and margin expansion due to export opportunities and tariff benefits. Textiles companies such as Welspun Living and Gokaldas Exports may also benefit from improved access to EU markets which could boost demand and competitiveness.
Market challenges
Potential impact on Tata Motors and Sula Vineyards
Tata Motors could face increased competition for its Jaguar Land Rover (JLR) brand in European markets, which may affect pricing power and margins. Meanwhile, Sula Vineyards could be impacted by cheaper wine imports from the EU affecting pricing power and market share.