India–EU Trade Deal Boosts Key Sectors; Markets Cheer, Auto Stocks Slip

India’s landmark free trade agreement with the European Union lifted investor sentiment on Tuesday, with experts calling it a timely boost amid global trade uncertainty. Analysts expect sectors such as textiles, pharmaceuticals, chemicals and electronics to be major beneficiaries, as the deal improves market access and levels the playing field for Indian exporters. DBS Bank economist Radhika Rao described the pact as “landmark,” highlighting strong growth potential in readymade garments once new tariff rates come into effect by January 2027.

The stock market reacted positively, with the Sensex rising 320 points and the Nifty closing above 25,175, rebounding from intraday lows. However, auto stocks declined up to 4 per cent amid concerns over lower import duties on EU-made vehicles. Market experts downplayed these worries, noting that luxury vehicles account for only about 1 per cent of India’s passenger vehicle market, limiting any material impact on mass-market players such as Maruti Suzuki, Mahindra & Mahindra and Toyota.

Beyond near-term market moves, experts see the India–EU FTA as strategically important. Edelweiss MF’s Trideep Bhattacharya said deeper integration with the EU could lift India’s exports by up to $50 billion by 2031, while helping counter global trade fragmentation. However, strategists cautioned that the deal will take time to become operational and should not replace efforts toward a US–India trade agreement, given India’s larger trade surplus with the US and ongoing foreign investor selling pressure in domestic markets.

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