Trade agreements bring only an "emotional dividend"; Indian stock market to face the test of the AI boom

Glonghui, February 4th丨The US-India trade agreement has dispelled the long-standing clouds hanging over the Indian rupee and may be enough to temporarily pause the ongoing sell-off by foreign investors in the Indian stock market. However, institutional analysis points out that investors say, for sustained capital inflows to return, Indian corporate earnings growth must recover and fundamentals need to see substantial improvement. The US-India trade agreement drove a surge in the Indian stock market on Tuesday and led the rupee to its largest single-day gain in seven years. However, the trade agreement is just one of many factors affecting India's exchange rate and stock market. Although the Indian stock market is currently near historic highs, it remains highly sensitive to the industrial impact brought by AI due to the lack of truly leading AI companies. Michael Bourke, Global Head of Emerging Market Equities at M&G Investments, said: "I don't think tariffs will have an immediate substantive impact, but they will undoubtedly affect market sentiment—which is the best way to understand it. With tariffs lowered, will corporate earnings immediately see a significant increase? I am not yet convinced by this logic."