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Informist, Thursday, Feb. 5, 2026

 

By Anshul Choudhary

 

MUMBAI – The trade deal with the US does more to improve sentiment in the equity market and less for actual earnings growth for now, analysts say. While the trade deal helped bulls take charge of the markets overnight this week, gains hereon will depend on the details of the trade deal.

 

The lack of details is expected to limit the upside in stocks, especially as major indices have already seen a sharp rise after the US said tariffs against India would be cut to 18% from 50%. Post the announcement, benchmark indices rose around 2.5% Tuesday and small-cap and mid-cap indices were up nearly 3%.

 

Technical analysts expect the Nifty 50 to rise in February as foreign investors cover their short positions over the next few days. However, it will get increasingly difficult for the index to hold on to gains as earnings growth has still not picked up meaningfully. The Nifty 50 is expected to face resistance around 26375 points, which indicates any rise will be capped at just over 2% from current levels, according to the median of estimates from 14 broking firms polled by Informist. On Wednesday, the Nifty 50 closed at 25776 points, up 0.2%.

 

US President Donald Trump said India has agreed to cut tariff and non-tariff barriers to zero and committed to buy $500 billion of US products, including energy, technology, agricultural, and coal. Analysts await details about the $500 billion of purchases to understand how this is spread across sectors.

 

"I don't think we'll have no tariffs (against US)...I am confident about that," Somil Mehta, head of retail research at Mirae Asset Sharekhan, said. "He (Trump) has made statements that don't match up, so wait till the document is in front of you."

 

Any unfavourable terms in the trade deal could push investors to quickly book profits, analysts said. The median of support levels given by technical analysts suggest the Nifty 50 may fall to 25100 points – down nearly 3% from current levels – if the details of the deal disappoint.

 

US and Indian officials have not provided clarity on whether products that fall under the Section 232 of the Trade Expansion Act in the US will continue to face tariffs. Further, the US Supreme Court is yet to rule on the legality of tariffs imposed by President Trump and a final ruling on this is likely to influence stock prices.

 

POSITIVE FOR FLOWS

The sharp fall of the rupee over the last few quarters had pushed foreign investors to sell Indian equities, fearing the currency depreciation would eat into their returns. The rupee depreciated nearly 5% in 2025.

 

Analysts said the trade deal, even in its unfinished form, has removed a key overhang for foreign institutional investors as it may help the rupee appreciate in the coming weeks. Market participants expect the rupee to rise gradually in the next few weeks to as high as 89.50-89.00 a dollar. The Indian currency had surged 1.4% against the greenback and settled at 90.2650 a dollar on Tuesday after the trade deal was announced.

 

"...government will also try to control our currency within certain limits now," Shrikant Chouhan, head of equity research at Kotak Securities, said. "They may not allow the currency to weaken further because now the tariff problem has been solved. So, export will be smoother."

 

Any appreciation of the rupee is expected to improve flows from foreign investors, who have been underweight on Indian equities due to the falling currency and high stock valuations. After the announcement of the trade deal, foreign portfolio investors bought equities worth over INR 52 billion on Tuesday — their highest single-day purchase in over three months.

 

However, there is still only a small hope that foreign investors will return to Indian markets in a major way. US bond yields of more than 4% makes investing in Indian markets unattractive at a time when benchmark indices' valuations remain close to the long-term average.

 

"They (FPIs) are much more comfortable with US market right now...and there is no fear dollar index will fall," Chouhan said.

 

Apart from valuation concerns, India does not provide any major opportunity related to artificial intelligence. Owing to this, foreign investors may not turn overweight on Indian equities just yet, analysts said.

 

LIMITED IMPACT ON GROWTH, RETURNS

The trade deal with the US has the potential to help India post higher-than-estimated growth for 2026-27 (Apr-Mar). Analysts are positive that nominal GDP growth in FY27 could be higher than the Budget estimate of 10%, but the extent of the increase in growth will depend on the details of the deal.

 

"The 18% tariff is still slightly negative for businesses but it won't be a problem as demand also increases," Mehta of Mirae Asset Sharekhan said. "The US can't start manufacturing overnight, it will take a lot of time."

 

The trade deal is expected to help only a few sectors, including jewellery, textile, and auto-ancillary companies, most of which are mid- and small-caps. A large part of the market is still dependent on domestic demand, analysts said.

 

Analysts said the cuts in Goods and Services Tax in September helped improve demand, but this has been largely concentrated in the automobile sector. The 34 companies in the Nifty 50 index that reported their December quarter earnings till last week, saw a rise of nearly 9% in their cumulative net profit, excluding exceptional items. This was better than the 4% growth in net profit in the September quarter for these 34 companies, but still failed to excite market participants. The revenue growth of these top companies improved slightly to nearly 12% in the December quarter from nearly 10% a quarter ago.

 

On top of this, the Union Budget on Sunday did not announce any big projects that can boost economic growth significantly in the near term. Analysts still hope companies will benefit from lower GST, but such expectations have now shifted to the March quarter.

 

Owing to the limited benefit of the trade deal and the lacklustre Budget, analysts don't expect estimates for economic growth or corporate earnings growth to see any major upgrade for now. Several analysts pointed out that the tariff on Indian goods is now 18%--which is higher than what prevailed before Trump imposed reciprocal tariffs in April last year. The 18% tariff could still impact growth of companies, analysts said.

 

Further, the economy might not get benefits of any further cuts in interest rates. Analysts expect the Reserve Bank of India to not cut rates this year as the trade deal with the US has come through and the central bank doesn't need to support exporters any more by letting the rupee depreciate. The RBI is expected to keep interest rates unchanged at 5.25% on Friday, when its Monetary Policy Committee concludes its three-day meeting.

 

"GDP growth (for FY27) can increase by 20-30 bps (post trade deal), but that will also depend if we get new deals wins," Dharmesh Kant, head of research at Cholamandalam Securities, said.

 

Expectations of returns from the market haven't changed as year-end targets of brokerages already included the trade deal with the US. Two heads of research said they have not changed their 2026-end targets and returns from the Nifty 50 are expected to be less than 10% this year if earnings growth does not improve soon.

 

Following are the support and resistance levels for the Nifty 50 index for February from 14 brokerages:

 

Brokerage	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	24500	-	26400	-
Angel One	25400	25000	26000	26350
Ashika Group	25500	-	26000	-
Emkay Global Financial Services	25500	25000	26300	26800
Globe Capital Market	25000	-	26300	26500
HDFC Securities	25200	-	26300	-
IDBI Capital Markets & Securities	24600	24050	26350	-
Kotak Securities	25350	25200	26375	26500
Lakshmishree Investment and Securities	25500	-	26100	-
LKP Securities	25500	-	26000	26200
Motilal Oswal Financial Services	25400	-	26500	-
Religare Broking	24700	-	26400	-
SAMCO Securities	24500	-	26350	26600
Teji Mandi Investment Technologies	25200	-	26000	26200
Median	25100		26375

 

End

 

US$1 = INR 90.37

 

Edited by Avishek Dutta

 

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