Modi's visit to the United States, and his meeting with Trump:The much-anticipated meeting between Indian Prime Minister Narendra Modi and US President Donald Trump is set to take place today, February 13, 2025.
Analysts say stock market investors are paying close attention to the meeting because it follows Trump's vow to impose reciprocal tariffs "on all countries" that impose taxes on US goods.
According to them, the stock market anticipates a productive meeting between Modi and Trump when the former travels to the US, with trade relations likely to be a key topic of discussion. The markets will be closely watching for lower tariffs or a larger common trade agreement.
"The markets are keeping a close eye on whether India and the US can agree on tariffs. Only a small number of foreign leaders have visited the US, including PM Modi. Even during their phone conversations, both leaders committed to a strong partnership between the two countries," said Pawan Parakh, fund manager at Geojit Financial Services.
Modi-Trump meeting agenda and market expectations
Ahead of Prime Minister Modi's visit to the US, the stock market has been tense. As investors discounted Donald Trump's "reciprocal" tariff announcements, the BSE Sensex index fell 2,412 points, or 3.07 percent, over the past six days, while the Nifty50 fell 694 points, or 2.92 percent.
According to Nomura, India has much higher relative tariff rates on Indian goods exported to the US and is subject to high reciprocal tariffs from Asian peers.
India, it estimated, levies a 9.5% weighted average effective tariff on US exports, compared to a 3% tariff rate on Indian exports to the US.
Notably, the White House said on Wednesday that US President Donald Trump may announce "reciprocal tariffs" before meeting with Prime Minister Narendra Modi. The Trump administration has previously stated that India's high tariffs exclude US imports. Against this, market analysts believe the Modi administration will handle Trump's likely high demands and reduce his negotiating power.
"India is strategically important to the United States' Indo-Pacific ambitions." Thus, the likelihood of trade negotiations appears to be high. India has taken proactive steps, such as lowering duties on certain US imports and returning illegal immigrants, to demonstrate that it is willing to engage in dialogue with the US administration, which has been well received. This significantly reduces the possibility of unilateral US tariffs on India," said Pawan Parakh of Geojit Financial Services.
Aside from that, analysts predict that markets will actively monitor Indo-US strategic cooperation in the energy and technology sectors, as well as more room for bilateral cooperation beyond trade, clarity on H1-B visas for Indian IT companies and less stringent compliances for Indian pharma companies, during the meeting.
Modi in the United States: What Does It Mean for Stock Markets?
Market experts believe that the current stock market decline largely prices in any negative news on the tariff front.
If India can enter into negotiations, the markets may experience a relief rally in the near future. However, new tariffs against India may further dampen market sentiment, though the extent of the impact will be determined by the tariff's fine print, they said.
"A positive outcome highlighting progress on trade concessions, reduced tariff risks, and a commitment to deepen economic ties could boost investor confidence, particularly in export-driven sectors. Furthermore, if the discussions reaffirm the strong US-India partnership without immediate policy shifts, markets may remain stable. However, any new tariff concerns could cause temporary fluctuations, affecting key sectors such as IT, textiles, and auto components.
