After months of uncertainty, India and the US have agreed on a trade deal that sharply reduces the punitive duties imposed in 2025. Tariffs on India’s exports to the US have been cut from 50% to 18%, placing India 1–2 percentage points more competitive than key export rivals such as Pakistan and Vietnam for labour‑intensive categories, including textiles, leather goods, gems and jewellery. On the other side, tariffs on US exports into India will fall to zero, with Jefferies assuming most agricultural products remain outside the ambit of the agreement.
Jefferies argues the deal removes one of the biggest overhangs on India’s equity story at a time when the market has already outperformed MSCI Emerging Markets by 28 percentage points in 2025 and a further 14 percentage points in January 2026 in US dollar terms. Foreign portfolio investors have nevertheless pulled out about $34 billion over the past 16 months, leaving India underweight in a sample of 63 EM funds with $330 billion in assets and around 60% of those funds underweight the country versus the benchmark.
Trade flows and macro backdrop
The US is India’s largest goods export market with shipments of $87.4 billion dollars in 2024, accounting for about 18% of total exports. Electrical machinery and equipment, pharmaceuticals, precious stones, machinery, apparel, organic chemicals, mineral fuels, made‑ups, vehicles and iron and steel dominate India’s export basket to the US, with the top ten lines accounting for a large share of flows.
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India’s goods trade surplus with the US has nearly doubled over the past four years to 46 billion dollars by 2024, underlining the strategic importance of the corridor for exporters and policy makers alike.
Sector winners from the deal
Jefferies flags auto ancillaries, solar manufacturers, chemicals, textiles and Adani Group companies as key beneficiaries of lower US tariff barriers and changes in crude sourcing patterns. Within autos, names such as Sona BLW and Bharat Forge are highlighted for their US exposure, while in chemicals, the brokerage points to Navin Fluorine, PI Industries and SRF among potential gainers. Solar players Waaree Energies, Premier Energies and Emmvee, alongside textile exporter Welspun Living, are seen as well placed to ride improved competitiveness and possible demand tailwinds out of the US market.
Adani group entities, including Adani Enterprises, Adani Power and Adani Energy Solutions could benefit through a combination of energy trade linkages and infrastructure plays related to deepening bilateral economic ties, Jefferies notes.
At the same time, the brokerage flags risks on the import side: a surge in US imports could pressure local producers in specific segments, and if landed prices of imported US oil and gas turn out higher, the trade re‑routing could weigh on oil marketing companies.
Portfolio shifts: metals in, IT pared
In response to the shifting macro and trade backdrop, Jefferies has announced a series of tweaks to its India model portfolio aimed at capturing the upside from the deal and recent price moves. The strategy team has cut its underweight IT stance further by trimming Infosys, while increasing weight in metals via additions to Hindustan Zinc and JSW Steel, taking materials to an overweight position after recent weakness in the space.
Hindustan Zinc is being used as a lever to play silver and zinc, with Jefferies citing strong cost advantages, spot silver trading about 50% above the December quarter average and an expected 41% jump in FY27 EBITDA. JSW Steel is expected to deliver strong sequential improvement as Indian steel prices rise following safeguard duties and China’s moves to curb “involution”, with Jefferies pencilling in a 34% quarter‑on‑quarter jump in March quarter EBITDA and 45% year‑on‑year growth in FY27.
Eternal added, consumer staple dropped
Beyond sector calls, Jefferies has also reshuffled its stock‑specific bets to align with the new environment. The brokerage has removed Godrej Consumer Products from its model portfolio and replaced it with Eternal, a foreign portfolio investor favourite leveraged to quick commerce and food delivery themes.
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Jefferies highlights Eternal’s strong growth and margin improvement across quick commerce and food delivery verticals and notes that the stock is trading about 25% below its peak, improving the risk‑reward profile at current levels. With lending financials, telecom, consumer discretionary, materials, power and real estate retained as overweight sectors and non‑lending financials, IT, staples, healthcare and industrials underweight, the refreshed model portfolio is designed to outperform MSCI India over a one‑year horizon as the India–US trade reset and earnings recovery story play out.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)