Export Stocks Rally as India-US Deal Cuts Tariffs to 18%

Introduction: A New Catalyst for Export-Led Growth

A landmark interim trade deal between India and the United States has ignited a strong rally in export-oriented stocks, providing significant relief to sectors that had been under pressure from high tariffs. The agreement, which caps US reciprocal tariffs on Indian goods at 18%, has been hailed as a major structural positive, immediately improving the cost competitiveness of Indian products in their largest market. The market response was swift and decisive, with shares of textile, seafood, and other export-heavy companies surging as investors recalibrated their earnings expectations.

The Core of the Agreement: A Tariff Reset

The central element of the trade deal is the reduction of US tariffs on a range of Indian exports to a standardized 18%. This marks a substantial decrease from previous levels, which had reached as high as 50% on certain goods, severely impacting the profitability and order books of Indian manufacturers. This tariff rationalization places Indian exporters in a more favorable position compared to key Asian competitors. For instance, in the textile sector, India now holds a slight tariff advantage over Bangladesh and Vietnam, whose exports to the US face levies of around 20%. The move is expected to help Indian companies claw back market share lost in recent months due to price disadvantages.

Textile Sector Breathes a Sigh of Relief

The textile and apparel industry has emerged as one of the primary beneficiaries of the new trade environment. The sector had faced a particularly challenging period, with exports to the US declining by over 31% year-on-year in November 2025. The tariff relief is seen as a crucial lifeline, potentially reversing this trend. US buyers, who had previously shifted orders to other countries, may now reconsider India as a primary sourcing hub. This optimism was reflected in the stock market, where textile counters witnessed sharp gains. Gokaldas Exports, a major apparel exporter, surged 20%, accumulating a rally of over 41% in just two trading sessions. Other notable gainers included Kitex Garments, which jumped nearly 12%, and Indo Count Industries, which rose by approximately 11%.

Seafood Exporters Celebrate a 'Double Win'

India's seafood sector, another industry heavily dependent on the US market, also saw a significant revival in investor sentiment. The US accounts for about 35% of India's total seafood exports, but shipments had fallen sharply after cumulative tariffs crossed 58% at their peak. Exporters reported losing nearly 70% of their business in the US market. The 18% tariff cap provides much-needed stability and restores price competitiveness. For seafood exporters, this development is being termed a 'double win,' as it follows a recent free trade agreement with the European Union that granted Indian seafood duty-free access. This combination of favorable trade terms in two major markets is expected to boost capacity utilization and improve cash flows across the value chain.

Market Reaction: Key Stocks in Focus

The positive sentiment was broad-based across export-oriented sectors. Companies with high revenue exposure to the US market were the biggest gainers. The rally was not just a one-day event but extended for a second consecutive session, indicating strong investor conviction.

Why the Market Reacted So Strongly

The sharp re-rating of export stocks is driven by several clear factors. First, it provides immediate relief after months of uncertainty and margin pressure caused by high tariffs. Second, the improved cost competitiveness is expected to translate into a recovery of order flows from US buyers. Third, many of the rallying companies, such as Avanti Feeds (65.4% of sales from North America) and Apex Frozen Foods (53% of export sales from the US), have a very high dependence on the American market, making the impact of the deal direct and significant. Analysts believe the tariff reduction could lead to a multi-year advantage, boosting earnings and encouraging capacity expansion.

Broader Implications for 'Make in India'

Beyond textiles and seafood, the deal is also seen as a positive for other sectors like gems and jewellery, engineering, and specialty chemicals. As the US continues its strategy of diversifying supply chains away from China, a more favorable tariff environment strengthens India's position as a reliable alternative. The agreement aligns with the Indian government's goal of doubling farm and marine product exports to $100 billion, using strategic trade pacts to fuel export-led growth.

Conclusion: A New Chapter for Indian Exports

The India-US trade deal has provided a powerful, near-term catalyst for Indian export-focused companies. By lowering a significant trade barrier, it has restored confidence and created a more predictable business environment. While the actual impact on earnings will unfold over the coming quarters and depend on sustained demand in the US, the immediate market reaction underscores the strategic importance of this agreement. For now, the export theme is firmly back in the spotlight, with investors closely watching companies best positioned to capitalize on this new phase of enhanced trade relations.