Markets Zoom On India-Us Trade Deal
Asian markets led the way by cheering the India-US trade deal on Monday
On Episode 790 of The Core Report, financial journalist Govindraj Ethiraj talks to Gaurang Shah, Senior VP, Geojit Financial Services as well as Krishan Arora, Partner and Indirect Tax National Leader at Grant Thornton Bharat LLP.
SHOW NOTES
(00:00) The Take
(04:02) Markets zoom on India-US trade deal but could the fine print put a damper?
(04:48) Why the Rupee’s revival may be in question.
(05:27) Brokerages are upselling gold and silver to fresh highs despite the carnage of last week.
(14:10) GCCs could employ 2.8 million in 4 years time.
(15:40) Could the India-US deal revive sentiment and investments beyond stock markets?
(24:29) Disney bets on its theme park head for CEO.
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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.
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Good morning, it's Wednesday, the 4th of February, and this is Govindraj Ethiraj Broadcasting and streaming weekdays from Mumbai, India's financial capital.
The Take: The India-US Trade Deal Forces A Long-Delayed Economic Detox
The price of admission to the global marketplace is rarely cheap, and for India, the bill has just arrived in the form of an 18% tariff.
India's recent union budget, which slashed import duties on a host of goods from aircraft components to lithium-ion manufacturing equipment, was the preamble. But the main event is a trade recalibration with Washington that looks, smells, and feels like the art of the deal, Trumpian edition. Under the new terms, the US will levy an 18% tariff on Indian imports, and this seems high compared to the 0% that has existed before, but then, context is everything.
Since August, Indian exporters have been staring down the battle at a 50% tariff, which is 25 plus 25% of punitive tariffs. So in the new transactional world of trade, 18% is not a defeat, it's a hard-won compromise. But there will be a shock to the system.
For decades, the Indian industry has operated behind a comfortable veil of tariff protection. And that era has been ending, but now the pedal is literally on the metal. Domestic incumbents are already alleging a capitulation to Washington.
But Prime Minister Narendra Modi's government has little room to manoeuvre. The economic indicators have been flashing amber. Foreign portfolio investments have been in retreat.
Foreign direct investment has remained moribund. And India has spent much of the last year receiving the cold shoulder from Washington, a chill that only began to thaw last week after India's free trade agreement with EU called also the mother of all deals. By inking this deal, India has chosen the pain of competition over the slow rot of isolation.
But the deal isn't just about nuclear equipment and medical devices, it's about geopolitics. The Kremlin raised its eyebrows after Trump said India would stop buying Russian oil as part of this deal. And that, of course, was the reason the US slapped a 25% punitive tariff on imports from India.
When asked if India might pivot away from Russian oil as part of this new alignment, a Reuters report quoted Kremlin spokesperson Dmitry Peskov as being diplomatically cautious, noting that Russia attaches no less importance to its partnership with Delhi. The silver lining for India is obviously that this pressure will force domestic reforms or an acceleration of domestic reforms that successive governments have somehow kicked down the road. Further lowering of tariffs on intermediates and final goods will expose the high cost of doing business in India, such as the exorbitant prices of land or commercial electricity.
India has much plumbing to do to unclog its pipes and we've been discussing this for a while. The speed of starting a company is a favourite talking point in India, but the nightmare of closing one is less talked about. If the 18% tariff is the stick, the carrot is a playing field.
Indian apparel and footwear exporters, for example, now find themselves on an even footing with regional rivals in the US market. So to capitalise on all of this, India must move faster beyond paper tinkering and address the structural plumbing of its economy. Protectionism is a drug that masks underlying inefficiencies and until now India has been raising tariffs in the last decade.
But now signing on the dotted line with the United States and the European Union, India is opting for a painful detox. It's a gamble, but in a world of 50% tariffs and shifting alliances, it's the only and perhaps best deal in town.
And that brings us to the top stories and themes…
The stock markets zoom on India-US trade deal, but could the fine print put a dampener?
Brokerages are upselling gold and silver to fresh highs despite the carnage of last week.
Could the US-India deal revive sentiment and investments beyond stock markets?
How global capability centres could employ 2.8 million Indians in four years' time
And Disney bets on its theme park head for its CEO.
The Markets Are Up
Asian markets actually led the way by cheering the India-US trade deal on Monday, even as the major indices shot up as expected after the US and India announced they had a deal on Monday night India time, which obviously boosted markets on Tuesday. The critical fine print is awaited and will determine the future course of the market to the extent that it is riding on this sentiment, but it was a much-needed sentiment boost in any case. The Sensex and Nifty obviously closed higher.
On Tuesday, the Sensex was up 2,072 points at 83,739, and the NSE Nifty 50 was up 639 points to 25,727. In the broader markets, the Nifty mid-cap 100 and small-cap 100 settled 2.8 and 2.82% higher. The rupee had its strongest intraday session in nearly six years on Tuesday.
Analysts now expect the currency to further strengthen in the coming months, Reuters reported, quoting the rupee hitting 90.13, the steepest gain since March 26, 2020. A note from Quotex Securities analyst Anindya Banerjee said the recent trade agreement and tariff reduction to 18% opens the door for modest appreciation in the rupee, but the pace and extent will depend on Reserve Bank of India intervention thresholds given the priority of maintaining export competitiveness. Foreign inflows may improve at the margin, though a sharp shift is unlikely as global investors remain focused on AI, quantum, memory, and data centre themes.
Elsewhere, for all the gyrations in gold and silver, the bulls are still ruling the metals market, it appears, with investors globally continuing to see precious metals as a hedge from equities and bonds, or for that matter, even currencies. Reuters quoted UBS and JP Morgan saying they hit $6,200 to $6,300 per ounce by the end of the year. Deutsche Bank is at $6,000 and Citibank has maintained its 2026 base case forecast, expecting a first quarter average at $5,000.
And on Tuesday, spot gold was at about $4,915 per ounce. So just to put things in context, last week, gold hit $5,594, that's almost $5,600, and silver had hit about $121, that's on January 29, before the carnage set in. Gold's 9.8% slump on Friday, almost 10%, was the largest daily fall in 43 years, according to Reuters data.
So even a rollercoaster does not begin to describe this. Elsewhere, oil prices were steadier on Tuesday, after falling about 4% in the previous session as market participants looked at global supply, as well as the possibility of a de-escalation in US-Iran tensions. Remember President Donald Trump saying that he was going to talk to Iran, and this came after, of course, threatening to attack Iran in some form.
Brent crude futures were at about $66.47, according to Reuters on Tuesday afternoon. So how are equity markets back home reading the latest India-US trade deal, given that the fine print is yet to come, and what is the market responding to, if the deal were to be stripped away, in a manner of speaking? I reached out to Gaurang Shah, head investment strategist at GeoJit Financial Services, and I began by asking him his read.
INTERVIEW TRANSCRIPT
Gaurang Shah: So, first of all, I think even on the budget day, look, first, I, for one, though being a market participant, I did not take the STT on futures and options from 0.02 to 0.05 as a big negative. We only, you know, unfortunately, we are only looking at one aspect of it from a market point of view. But if you look at from the economic point of view, I think there is a lot that the Honorable Finance Minister has done in the budget and it is more importantly in continuation of the past budget.
So, I think the budget had nothing wrong other than market-related unpleasant surprise that was given in form of increase in STT. Now, coming to your question, and yes, even on the budget day, when the announcement was made, it was 2,100 points down on the Sensex and 700 points down on the Nifty. And we recovered, though we closed lower, but we recovered.
So, yesterday, we saw a follow-up recovery. And today, after that late-night announcement yesterday of the US-India trade deal, of course, the contours are not yet known to all of us. Details are still awaited.
I was given to understand that later on, on Tuesday afternoon, Minister Goel was going to give some details, but I don't know whether that has happened or not. That has not come to my knowledge. So, first of all, it is good to see that the differences have been patched up and the in-principle agreement of a deal being in place has been announced.
And as I speak to you, I'm reading a report a while back that there are still some work that is being done at the back doors by both the governments in the US and as well as in India. The representatives from both countries are still trying to give it a finishing touch. I think possibly later on today, or maybe tomorrow, or maybe soon, we'll have the details coming through.
And that should give us a lot more clarity. But it has soothed the sentiments, definitely, yes.
Govindraj Ethiraj: Right. So if you were to strip away the sentiment part of the rise that we saw in the markets, what else is driving it or not driving it? For example, this is earnings season, how have earnings been?
How are you seeing flows?
Gaurang Shah: So on earnings part, of course, there is always a scope of improvement as all of us expect. But whatever we've seen up till now, and I think next week will be the last week, I believe, for the Q3 earnings. And then we'll have curtains down barring one or two companies here and there.
So whatever we've seen up till now and expecting that whatever remains to be seen this week and next week should be a shade better, or at least there should not be any disappointments. So it was good to see that there were no dark spots or no red flags in whatever we've seen up till now in the Q3 earnings. In terms of Q4 earnings and the next financial year, I think whatever momentum that we've got to heard from the management, respective management of respective countries and sectors tells us that there are better times.
One thing that I want to highlight going is that all of us expected that the new avatar of GST 2.0 would translate into huge turnaround in Q3 season. But it is just 22nd of September 2025 that those changes were put in place. I think fourth quarter you should have a better color and a shade and next financial year onwards, we should be in a much better position.
So expect the earnings improvement on fallback of all these changes that has happened and of course the trade deal between India and US. And one more thing, I think FI who are net-net sellers go with, there could be a little bit of pause. I'm not saying that they'll come back immediately, but they'll take a while.
But at least that huge sell side number that used to be there from the FIs since October of 2024 till last year until whatever scene of Jan 2026, I think there should be a little bit of respite from there. My sense is also that the primary market should also get fired up in terms of quality IPOs and decent valuation.
Govindraj Ethiraj: Right and I'll come to the overall sentiment linked to the trade deal in a moment. But what do you feel is triggering or could trigger a return in foreign investment or foreign institutional investment given of course that we've been seeing outflows consistently. I mean what's changed on that particular accord?
Gaurang Shah: So one of the most important thing was of course you know like what I've been to understand and I stand to be corrected if I'm wrong with that whatever FI money comes into India 40% is from US-based institutions. You may see pulling off of sell side number that's what exactly I said that trade deal positivities as it is known to us and whatever will be known to us in the future will possibly turn the table from FIs outflows into FII outflows reducing and then possibly coming back into India in terms of growth story. So what I'm positive about is that the lower inflation, lower interest rates, GDP growth rate, consumption story and I'm sure whatever has been done in budget will give an additional push towards the consumption and in terms of policies a more stable policy.
My view was with that FII money is not a long-term money. FDI money is long-term money and I think over there the finance minister and the government of India has done some decent changes in terms of attracting that flows FDI flows into India. FII flows I'm given to understand that large part of whatever they were holding they were sold off it's just 15 to 20 that they have right now in Indian in terms of equity investments and with that kind of a number I don't think we're going to see after this development of the trade positivities between India and US.
I don't think that should create any kind of negative hurt.
Govindraj Ethiraj: Right last question so if let's say there are some surprises on the fine print to our detriment how do you see the markets reacting I mean do you think the sentiment will continue to remain or will it revert to or closer to where it was before the deal was announced?
Gaurang Shah: I was in conversation with my team members and certain people in the market most of them including me to be very honest Govind we feel that we are possibly preparing ourselves to cross over the all-time highs we've seen and make a new all-time high. The only joker in the pack is the geopolitical situation Govind. I think if US has to take any kind of aggressive stance with respect to Iran and if the global supply pipeline one of the important one which is the state of Hormuz if there are restrictions over there then energy prices crude oil prices can jump up and which can create short to medium term issues for economies like India which are largely dependent on import of energy like crude oil and natural gas. Other than that I don't think there should be much of worry if earnings are going to get delivered in expected lines I think the markets will adjust itself towards a little bit of more upside.
Govindraj Ethiraj: Gaurang, thank you so much for joining me.
Gaurang Shah: Always a pleasure Govind.
The GCC March
The Union Budget has offered tax concessions to Global Capability Centres, or GCCs, which are now being set up at a pace of several a week in sizes small and large. GCCs are essentially captive centres for large multinationals globally.
India is poised to host more than 2,400 GCCs by 2030 or in four years' time, and will employ over 2.8 million professionals, according to a FICCI analogue report titled Workplaces 2025 India Commercial Real Estate Reimagined. As a backdrop, by 2024 end, India had about 1,700-plus GCCs and employed 1.9 million professionals. The other interesting fact is this, GCCs are now expanding beyond the top seven metros to tier-two cities like Jaipur, Kochi, Indore, and Coimbatore.
GCCs are also the largest occupiers of office space and now account for more than 40 percent of total gross leasing in these cities. In 2025, of an approximate 80.5 million square feet of gross leased office space, GCCs accounted for about 32 percent in the top seven cities. Bangalore is India's leading GCC market, over 875 centres, and that's about 29 percent of the total.
Overall, says the FICCI analogue report, India's office market in 2025 demonstrated marked resilience and saw an all-time high of office space leasing across the top seven cities.
Decoding the Deal
India has agreed to buy petroleum, defence goods, and aircraft from the United States while partly opening up its highly guarded agriculture sector under the deal that was announced on Monday night India time, according to government officials who spoke to Reuters. Trump said India had agreed to buy more American goods with purchases rising to as much as $500 billion, including energy, coal technology, agriculture, and other products.
Now that figure does seem a little stretched unless it's stretched over several more years. The official also told Reuters India had agreed to buy U.S. goods, including telecom and pharmaceuticals, and offered market access for some agricultural products as part of New Delhi's commitments under the deal. India has also offered select market access for agricultural products to the European Union under the trade deal.
Now, of course, there are red lines and have been reiterated in both agriculture and dairy, but there could be very specific areas, maybe soybean, which could be allowed. The official also told Reuters that India has also lowered tariffs on imported cars to address the United States' immediate demands to conclude the first tranche of the deal. The official added that the commitment to buy U.S. products, which covers sectors like pharmaceuticals, telecom, defence, petroleum, and aircraft, will be done over the years and, more importantly, a comprehensive pact with the U.S. will be negotiated in coming months.
I reached out to Krishan Arora, partner and India Investment Roadmap Leader at Grand Thornton Bharat, and I began by asking him how he was reading the outcome of this deal and whether it would lead to a resumption in direct investment.
INTERVIEW TRANSCRIPT
Krishan Arora: I think last night from the message from President Trump followed by PM Modi's you know note came as a pleasant surprise to the country. I think could be a better day. US being the largest trading partner for India, I think it was a significant moment of whatever we've reached out of now and a very apt moment by you know just being followed by one the budget where the reform express was what was driving with a clear focus to boost manufacturing and two of the largest deal was signed off actually in less than two weeks.
And a combined money ticket size of these deals were about $50 trillion. And that's something which India is actually the common factor. So from the fact that and I agree with you, the deal has been announced, I think it's yet to be signed off.
Given the limited information as of now, I think the immediate initial effect is primarily driven by the lower rate announcement with respect to the tariffs and the already existing market sentiment. What is probably will be seen is that the announcement in terms of reduction of the tariffs on Indian goes to 18% is a significant decrease from the previous punitive rates which are escalated to 50% in 2025. I think the immediate effect of this is that it changes and enhances the competitiveness for the export market again.
I think it will boost the pricing power again for Indian companies in the US market who had actually shrunk their margins. That's the moment of celebration for them even though you know the fine print is yet to be issued. So I think from a macroeconomic standpoint, this is the first start.
So you know, very positive in terms of how global investors also see it in terms of the India's export outlook and how for Indian exporters as well. In the near time, I would say with clarity, I'm sure that this will support the earnings and if the consumer demands continues to remain resilient in the US, this will definitely flow very, very quickly. For that matter, an immediate market reaction is already known.
I think Rupee has already surged 1.2%. So you know, you can see the sentiment that way. Politically also, it represents rejuvenation of the bilateral relations following a very challenging period which was characterized and driven by tariffs and the disputes over Russian oil imports, etc. So that's probably what it is I can see.
But I think one more thing which is important here, Govind, is that while this is all being discussed, this India-US will sign an early harvest deal, first covering limited goods and sectors, and gradually it will move to a larger FTA. If that also happens, the immediate impact on the bilateral trade definitely will be limited. However, having said that, most of the Indian industry will definitely look at future reductions, if not immediate.
The ultimate removal of tariffs seem to be going towards zero, is what I think at least President Trump has been talking about, which completely removes the apparent disadvantages and putting India back on track in that game with the US.
Govindraj Ethiraj: Right. So if I were to look at the 0% that India has to now honour, what does that mean? One is, it looks like this deal is immediate.
And to that extent, I think the budget has already set the process moving by bringing down tariffs on items that we are likely to import from the United States, like let's say nuclear equipment. Now, what else would we need to do? And how broad could the net be?
Krishan Arora: When you say what is the pledge it entails, you know, it's very clearly what is being kind of expected from India is to lower the barriers on the US goods and increase the purchase of US energy, technology and agricultural products, which potentially is a very large amount, if you know, through these timelines are unclear, but that is what has been committed. And that eventual zero can not happen, like I said, immediately because these are reciprocal tariffs. So my assessment would be, it will happen in a gradual phase, it cannot happen that everything what India kind of agrees to do will be immediate and the one which US will do will be later, both the things will happen in parallel.
And that's the exercise, which I think both the countries are right now starting to do. And it's already ongoing for that matter. In fact, yesterday at the CNBC event, I was talking to the Secretary Ministry of Commerce, Mr. Aggarwal mentioned about a lot of grounds have been covered already, the fine tuning is what is left. While there was no comment at that point of time for the announcement to come later that evening. It just happened after that. So yeah, you can understand on that.
But negotiations definitely required because one of the important elements if you have also seen is about the key sectors which are on national security for the US, which are section 232 items of the US Trade Expansion Act. And that covers a huge quantum of the export market for India to the US. It's almost one tenth and auto stands out in that the steel, aluminium, copper, timber, and those are at 50% which is outside this.
Yeah, so those are not covered by the tariffs. That's not being talked about right now. So there is no change, which is immediately applicable on that because if that has to happen, the amendment in that has to happen.
So these will remain outside the FTA benefit purview as of now.
Govindraj Ethiraj: Or the reciprocal tariffs.
Krishan Arora: Absolutely.
Govindraj Ethiraj: Okay, so let me ask the sentiment question.
Now, as you said, you know, we've been a bit in the cold in the last year or so, because relations between India and the US have been frosty, to put it mildly. Now that things seem to have changed, what else could this do? I mean, for example, could this lead to a shift in foreign direct investment?
Could we see higher levels? Could something else benefit? Assuming all of that was linked to this to start with?
Krishan Arora: So yes, I think there's a mixed, you know, kind of an impact, which will probably definitely happen. One is on the sectors, which will definitely have immediate, you know, impact. And that could be, you know, something like apparel and textiles, which are very, very hugely dependent upon US market, gen jewellery, engineering goods, electronics, and pharma as well.
So these definitely have a, these will regain that market share, it seems to be from the, even from the concession tariffs, because what most of the industry has kind of opined is, they were not able to even recover their margin, but they had to survive and they continued business. They were finding alternate supply chains, you know, also with the signing of other trade pacts, the market, you know, discovery was moving to other parts of the world, especially the EU and the UK. But now with this coming back, I think, you know, what has existed as a business, which had continued for them, will revive immediately.
From that perspective, I think they will have to also take a pause to, you know, look at their supply chain, revisit if they've taken any decisions on pricing, negotiation, then go back and, you know, do that with their counterparts or buyers in the US. From the other perspective also, you know, I think what will probably be also required is that this will obviously set up some new investment into Indian manufacturing. I think that's the chance of now saying that there is some definites which are coming up.
And at this moment, when the budget also talks about resilience for India, especially from the manufacturing sector space, which has been the focus of this budget, I think a lot will depend upon how this moves from here, from the Indian manufacturing standpoint, not just from a make in India, but now from a resilient Indian standpoint.
Govindraj Ethiraj: Thank you so much for joining me, Krishan.
Krishan Arora: Thank you. Pleasure always.
Disney’s New CEO
And some global news. Walt Disney Company has appointed a 28-year-old veteran, Josh Tamaru, as its next CEO, effective March 2026.
That's next month, which also ends a very long succession drama and also signals, more importantly, a strategic pivot towards its high-margin experiences and theme park divisions. Outgoing CEO Bob Iger, who actually returned in 2022 to stabilise the company, will transition to a senior advisor role through the end of 2026. And then Elon Musk has consolidated his empire by having SpaceX acquire XAI, which includes the social media platform X, earlier known as Twitter, and forming a $1.25 trillion private entity focused on building solar-powered, space-based data centres for AI computation.
And all of this could apparently be eyeing a summer 2026 public listing.
