India–US trade deal positive for export, rupee and FII confidence: Ajay Garg of SMC Global

The India–US trade agreement and Union Budget 2026 together send a strong signal of policy continuity and long-term growth intent, said Ajay Garg, Director and CEO of SMC Global Securities. While the trade deal helps ease market uncertainty, support the rupee and boost export-oriented sectors, Garg in an interaction with Business Today, says the Budget’s record capex and fiscal discipline reinforce India’s investment-led growth story, despite near-term market headwinds from higher STT. Read the edited experts:
 

BT: India-US have signed a trade-agreement with the US. What is your view on it? Has it ended the uncertainty for the Indian market? Will it revive Indian rupee and FII inflows?

Garg: The India–US trade deal announcement has been perceived as a strong positive for markets. There is a reduction in tariffs from 50% to 18%, which will place India on a competitive footing compared to other exporting countries such as Bangladesh, Vietnam, and Thailand. The US and India have earlier announced an ambitious target of expanding trade to $500 billion by 2030. India has further strengthened its position in global trade, especially after the recent momentum from the India–EU trade deal. The deal will help ease market uncertainty and benefit several export-oriented sectors such as textiles and apparel, seafood, auto ancillaries, engineering goods, chemicals, gems, and jewellery. It will also support the rupee, as India enjoys a trade surplus with the US. Higher exports mean more dollar inflows, which are converted into rupees, thereby supporting the currency. For FIIs, the deal is likely to enhance confidence in India’s growth story, supported by strong domestic fundamentals. However, sustained inflows will ultimately depend on corporate earnings, valuation comfort, and how the agreement finally takes shape.

BT: What is your overall take on the Union Budget? What were the biggest hits and misses by the FM? What could have been done better?

Garg: The Union Budget 2026-27 is a pragmatic, continuity-oriented document that prioritizes fiscal discipline, structural reforms, and sustained public investment in a volatile global environment. It maintains a strong focus on supply-side growth through manufacturing expansion in strategic sectors, MSME support, and a record Rs 12.2 lakh crore capex outlay, which should support long-term economic resilience. Key strengths include the targeted push for self-reliance with schemes like Biopharma SHAKTI (Rs 10,000 crore), expanded semiconductor capabilities, rare earth corridors, chemical parks, and an integrated textiles revival program, alongside meaningful liquidity measures for MSMEs via TReDS mandates and the Rs 10,000 crore SME Growth Fund. 

However, the budget falls short on market-sensitive issues. The hike in STT on futures and options acts as a clear headwind for active market participants. The absence of concrete measures to address rupee depreciation, tariff-related risks, and FII outflows was also noticeable. Despite a 15 per cent increase in the defence budget, the lack of targeted measures or a clear export-oriented push was another missed opportunity. Overall, the Budget leans more toward an investment-driven approach rather than a consumption-led one, reinforcing a long-term growth outlook.
 

BT: With rise in STT on futures and options, the intention is clear to limit the volumes and retail frenzy. Do you see the new rules denting FIIs sentiments and their selling likely to continue? 

Garg: The STT hike on futures and options is a deliberate step to curb speculative trading, moderate retail frenzy in derivatives, and raise revenue while echoing SEBI’s concerns about high retail losses in F&O. It is expected to reduce overall derivatives volumes in the near term, with the sharpest impact on high-frequency and retail participants. FII sentiment may face temporary pressure because many use F&O for hedging India exposure, and higher transaction costs could discourage some activity, potentially extending selective outflows amid ongoing global rate and currency uncertainties. 

However, FII inflows are overwhelmingly driven by macro factors such as US Fed policy, rupee trajectory, and India’s growth outlook. The budget’s fiscal prudence and capex momentum should continue attracting long-only equity flows. Large-scale FII exit is not anticipated unless global conditions deteriorate further.

BT: Which sectors are the likely winners of this budget, considering the highest ever capex announcement? What does it mean for the investors and markets?

Garg: The record Rs 12.2 lakh crore capex announcement makes infrastructure, construction, capital goods, and select manufacturing segments the clearest winners, setting up sustained order flows and economic multipliers. Infrastructure benefits directly from new freight corridors, 20 operational National Waterways, seven high-speed rail link, coastal cargo promotion and city economic regions, creating strong tailwinds for EPC contractors, construction equipment manufacturers, logistics, and port-related businesses. Manufacturing gains from focused interventions in biopharma, semiconductor, electronic, rare earths and chemicals, textiles and capital goods, supporting domestic value addition and export competitiveness. MSME ancillaries and suppliers in these chains will also see positive spillover. 

BT: What does the union budget signal for PSU stocks, especially banks, defence, railways and infrastructure companies? Do you see any value in them or its time to give them a skip?

Garg: The Budget sends a constructive signal for many PSU-linked themes, particularly those tied to infrastructure, financing, and strategic manufacturing. The banking sector is described as being on a strong footing, and the proposal for a High-Level Committee on Banking indicates a reform-oriented approach for the next growth phase. Asset recycling through REIT structures and continued infrastructure expansion support PSU entities in transport, logistics, and project execution. 

The proposed restructuring of public sector NBFCs like PFC and REC also points to strengthening development finance. Therefore, rather than a blanket “avoid PSUs” stance, the message is to remain selective, focusing on PSUs aligned with infrastructure, financing, and defence-manufacturing ecosystems that have structural tailwinds.

BT: Beside the budget, precious metals have taken a solid hit lately. Do you see this as the opportune time to buy them or more pain is likely further?
Garg: Fundamentally, Silver's crash is a ‘Liquidity Reset’ rather than a change in the long-term industrial story. While President Trump wants Kevin Warsh to cut rates, the market is terrified of the ‘Warsh Strategy’ of shrinking the Fed's balance sheet, which has tightened global liquidity and sent the US Dollar Index (DXY) to 4-year highs. 

This global dollar surge collided with an "Internal Flush" in India. The absence of a customs duty hike in Budget 2026 removed the last reason for domestic traders to hold, while massive CME/MCX margin hikes forced leveraged players to sell everything at once. In short, the "paper market" is panicking to cover margin calls, even though the physical deficit (AI and Solar demand) remains intact. Until the forced liquidation ends and the dollar stabilizes, more short-term pain is likely.