The recent signing of the India-UK Free Trade Agreement (FTA) has sparked significant interest among investors, marking a pivotal moment in India’s economic trajectory. This milestone is expected to drive substantial growth across key sectors, providing fresh opportunities for long-term investments. Abhay Agarwal, a prominent market analyst, recently shared his insights on this development and its potential impact on various industries.
Market Resilience Amid Geopolitical Tensions
Agarwal addressed the resilience observed in Indian markets despite recent geopolitical tensions. He noted that while there was an expectation of a knee-jerk reaction, the market has demonstrated impressive stability, supported by robust volumes from both domestic and foreign investors. According to Agarwal, this resilience stems from a clearer understanding of the geopolitical landscape, reducing uncertainties that had previously weighed on market sentiment.
Positive Signals from the India-UK FTA
Discussing the broader implications of the India-UK FTA, Agarwal emphasized the transformative potential of this agreement. He highlighted that the swift conclusion of this decade-long negotiation sends a powerful message to global markets. It signals India’s commitment to expanding its share of global trade and becoming a significant manufacturing hub. He praised the Indian government’s efforts in pushing through the agreement, viewing it as a critical step toward establishing India as a key player in global supply chains.
Top Sectors to Watch Post-FTA
Electronics Manufacturing Services (EMS) – Agarwal identified the EMS sector as a top pick, citing companies like Dixon Technologies, Amber Enterprises, and Kaynes Technology. These firms have significantly benefited from the Production Linked Incentive (PLI) schemes, positioning themselves as global competitors in electronics manufacturing. With companies like Apple planning to scale up production in India, the sector is poised for substantial growth as India aims to reduce dependence on Chinese imports.
Pharmaceuticals – While the India-US trade resolution remains pending, Agarwal expects the pharma sector to be a major beneficiary of the India-UK FTA. The agreement could provide Indian pharma companies with easier access to UK markets, enhancing their global reach and profitability.
Sectors to Avoid
However, Agarwal advised caution in two key sectors:
IT Services – Despite being a traditional powerhouse for the Indian economy, the IT services sector faces challenges from evolving global tech trends. Agarwal expressed concern over the sector’s inability to innovate quickly enough, leading to pressure on margins and sluggish growth projections.
FMCG – High valuations coupled with modest growth rates make the FMCG sector less appealing at current price points. Agarwal believes that local brands are increasingly capturing market share, putting additional pressure on established players.
As India forges new trade partnerships and strengthens its position in global supply chains, sectors like EMS and pharmaceuticals are likely to benefit significantly. However, investors should remain cautious about overvalued sectors that face structural challenges. With the India-UK FTA setting the stage for broader economic growth, selective sector bets could offer substantial returns in the coming years.
