Next Market Rally Hinges On US Trade Deal, Tariff Relief: Citi's Surendra Goyal
The US trade deal may trigger the next rally, if it turns out to be more positive than what the market anticipates, the top Citi India analyst said.
One of the biggest questions hanging over Indian equities today is whether a potential India-US trade agreement could become the next major catalyst for markets. According to Surendra Goyal, Head of India Research at Citi, the answer depends on both the clarity and the contours of the deal, which foreign investors have been waiting on for months.
Goyal, while speaking to NDTV Profit on Friday, pointed out that India has underperformed emerging markets by nearly 25% this year. Two major factors drove this gap: the shift in expectations around tariffs, and the global AI trade that has benefited other emerging markets far more than India.
Only six months ago, investors believed India would be a key beneficiary of a trade deal with the United States. Instead, the narrative shifted as India’s effective tariffs remained elevated, creating discomfort for foreign institutional investors and contributing to sustained outflows.
If the trade deal provides favourable clarity and a path to lower trade frictions, then Goyal believes it would resolve one of the biggest concerns faced by global investors. This would act as a powerful catalyst for Indian markets, he added.
Other supportive factors are already in place, he explained. GST-related benefits are beginning to flow through, with both festive-season data and recent earnings beating expectations.
After more than a year of consistent earnings downgrades, the latest season delivered 12% profit growth for the top 100 companies. In addition, emerging market investors remain heavily underweight on India, close to 20-year highs, leaving significant room for reallocation if sentiment improves.
Goyal noted that markets typically dislike uncertainty, and removing the overhang of tariff ambiguity would itself be a positive. A favourable outcome would not only bring clarity but also shift the broader narrative around India among foreign investors. With Indian equities sitting on large underperformance and substantial outflows, even partial clarity could help reverse some of the recent weakness.
Ultimately, he argues that the conditions for a rebound already exist: stabilising earnings, improving domestic indicators and a meaningful global underweight position. Clarity on the trade deal is the missing piece. And if the clarity turns out to be more positive than markets currently anticipate, it could become the trigger that sets off the next market rally.
