Trump, PM Modi, trade deal: Will the stock market extend Diwali cheer?

US President Donald Trump’s remark that India is unlikely to buy “too much oil” from Moscow, his greetings to PM Narendra Modi on Diwali, along with reports suggesting that New Delhi and Washington are close to finalising a long-pending trade agreement, could extend Diwali cheer for Indian equity investors.

According to reports, the proposed trade deal may see the United States reduce tariffs on Indian imports to 15–16 per cent from the current 50 per cent. To be sure, the 50 per cent tariff is weighing on domestic exports, with merchandise trade deficit widening to $32.2 billion in September from $26.5 billion in August.

Nomura India in a note said the impact of 50 per cent US tariffs is clearly visible as export to the US degrew 11.9 per cent YoY in September, while picking up for some other destinations.

"Textiles, leather, gems & jewellery, chemicals, engineering goods, and pharma export growth moderated, while electronic goods export growth continued to outperform," it said while expecting export growth to remain weak due to higher US tariffs, while import growth will likely hold up, keeping the trade deficit elevated.

"A potential detente with the US on trade is possible but remains uncertain," Nomura India said.

Overall, export growth in September remained largely unchanged at 6.7 per cent YoY but import growth rebounded to 16.7 per cent from a degrowth of 10.1 per cent in August.

"While global markets remain hesitant, India continues to exhibit structural strength underpinned by macro stability, resilient earnings, and fiscal discipline. The near-term trajectory will hinge on Nifty’s reaction around the 26,000 resistance zone; a breakout could trigger renewed momentum, while sustained consolidation above support is likely to attract fresh buying interest," said Ponmudi R, CEO of Enrich Money.

Oil imports from Russia

In his media interaction, US President Donald Trump claimed that the Indian Prime Minister had assured him that India would not buy Russian crude oil. He further added that India could not immediately halt shipments, but it is a process that will be over soon. The sudden announcement looks surprising, Kotak Institutional Equities said.

"We note that with reduced discounts on Russian crudes, rising premiums from other countries, lower Venezuelan imports and higher US imports, India’s average crude import costs versus Dubai crude have been rising since the lows of FY2023. Premiums have been particularly high this year. With the sharpest reduction in Russian imports, HPCL’s crude cost increases are the sharpest," it said.

"Further changes in the crude mix could keep the premiums to the Dubai benchmark elevated. With rising crude costs (versus benchmark), Indian refiners’ reported GRMs have been moderating and could stay under pressure," Kotak added.