India, with a 1.5 billion population, is emerging from relative isolation. After years of reluctance to open up, the country is now cautiously accepting foreign competition, making its market more competitive.
This further unlocks the potential of the world’s most populous country and has been welcomed by Indian equity markets. After a tough 2025, markets have regained momentum and begun to recover.
With a weak US dollar lowering import costs for emerging markets and investors seeking alternatives to US equities and traditional leaders like technology, India is attracting renewed interest.
Opening the Indian market should mark a new growth phase for Indian assets, which we aim to capture.
A strong signal from the EU agreement
These agreements are, above all, a strong signal to investors: India is open for business. Presented as the “mother of all agreements” and signed after nearly two decades of negotiations, the deal with the European Union theoretically creates a market of two billion consumers.
It also eliminates tariffs on 90% of Indian exports to the EU. In sectors where India has established expertise, such as textiles, this should make it a formidable competitor to Chinese and Southeast Asian producers.
India aims to attract investment and expertise in other sectors, serving both local and European demand.
Another notable element is the mobility of skilled workers and students, who will gain easier access to European labour markets and universities on a temporary basis. This offers India an opportunity to improve workforce skills, while helping Europe address shortages in qualified labour, particularly in engineering and technology.
From a European perspective, the automotive and alcoholic beverages sectors are the main beneficiaries. Tariffs on vehicles will gradually fall from 110% to 10%, subject to an annual quota of 250,000 vehicles.
Duties on alcoholic beverages will decline from 150% to 20%, with producers hoping to tap demand in India as consumption patterns evolve in Europe. As with the Mercosur agreement, this deal also signals both parties’ commitment to globalisation and free trade, even though contentious issues (particularly in agriculture) have been set aside.
The US agreement brings short-term relief
In the near term, the agreement with the United States has been most positively received by markets.
The US is India’s largest customer, accounting for nearly 20% of India's exports. Tariffs of 25%, combined with a 25% surcharge, had pushed total duties to 50%, among the highest applied by the US to any trading partner, and severely undermined the competitiveness of Indian products.
The new agreement sets tariffs at 18% and removes the surcharge, so Indian products face only 18% duty.
While still high, this level is manageable, as India is no longer disadvantaged relative to Asian competitors such as the Philippines, Indonesia, and Vietnam, which face tariffs of 17% to 20%.
This limited agreement lays the path for a broader trade deal, closely watched by Indian markets.
For now, complementary economies
Trade agreements between India and Western markets, such as the European Union and the United States, are highly attractive for all parties.
Unlike China, India has not yet moved significantly up the value chain and is therefore not, at least for now, a direct competitor.
These economies are complementary. Such a large market opening is positive as some sectors face limited growth.
This partnership gives the West a stake in India developing a broad middle class that could consume Western products, as China has.
The recent rapprochement is therefore only the beginning of what could be a long and mutually beneficial relationship.
Financial sector is the most present in markets
Indian equities are not cheap: with a forward price-to-earnings ratio above 21x, they trade well above the emerging market average of around 14x.
Dominated by the financial sector, which represents nearly 30% of the MSCI India, the market is nonetheless relatively well diversified, with meaningful exposure to information technology and healthcare.
Above all, it stands at the threshold of what could be a period of strong growth, driven both by accelerating trade with the West and by increased investment in the domestic market.
Our portfolio contemplates Indian stocks. See Euroconsumers Invest’s complete suggestion:
