India-US Trade Agreement Ignites Buying Frenzy in Electronic Manufacturing Stocks
Stocks in India's electronic manufacturing services (EMS) sector witnessed a significant surge during Tuesday's trading session, February 3, building on momentum from the Union Budget rally. This renewed investor interest was primarily driven by the recent reduction of US tariffs on Indian imports, which has substantially enhanced earnings visibility and re-rating prospects for companies operating in this space.
Notable Stock Performances and Market Reactions
Avalon Technologies experienced a remarkable surge, with its shares hitting the 20% upper circuit limit at ₹1,022 per share. This price point represents the stock's highest level in over two months, indicating strong bullish sentiment among investors.
Syrma SGS Technology demonstrated impressive growth, rallying 10.6% to reach a two-month high of ₹802.55 per share. Meanwhile, Dixon Technologies and Kaynes Technology recorded substantial gains of 7% and 8.3% respectively, reflecting widespread optimism across the sector.
Other prominent players in the electronic manufacturing domain also participated in this upward movement. Amber Enterprises climbed 9.3% at its day's high, while PG Electroplast advanced 8.4%, showcasing the broad-based nature of the rally.
US Tariff Reduction: A Game-Changer for Indian Exports
The catalyst for this market movement came from Washington, where US President Donald Trump announced significant tariff reductions on Indian imports. The basic tariff was lowered to 18% from the previous 25%, and reports indicate the removal of an additional punitive 25% duty that had been imposed in response to India's crude oil purchases from Russia.
These higher tariffs had created substantial headwinds for Indian markets in recent months, contributing to the Indian stock market's underperformance compared to other Asian economies throughout 2025. The tariff relief has effectively removed this key overhang, creating more favorable conditions for Indian exports to the United States.
EMS Sector Emerges as Primary Beneficiary
Market analysts and brokerage firms have identified the electronic manufacturing services space as the primary beneficiary of the improved trade relations between India and the United States. Experts at domestic brokerage firm Axis Direct emphasized that EMS companies stand out as key beneficiaries of the US-India trade agreement.
With the combination of tariff support and ongoing supply-chain realignment, India is positioned to gain significant market share in several critical areas:
- Smartphone assembly and manufacturing
- Semiconductor outsourcing, assembly, and testing (OSAT)
- Electronics components production and supply
This development reinforces the manufacturing cycle driven by the Production Linked Incentive (PLI) scheme and provides substantial support to both listed EMS players and their ancillary suppliers across the value chain.
Broader Sectoral Impact and Expert Perspectives
Tushar Badjate, Director of Badjate Stock & Shares Pvt Ltd, highlighted that the lower tariffs could benefit multiple sectors beyond electronic manufacturing. According to his analysis, improved market access, supply chain diversification, and sustained US demand could positively impact:
- Information technology services
- Pharmaceutical manufacturing and exports
- Defense-linked manufacturing industries
This broader perspective suggests that the trade agreement's benefits may extend well beyond the immediate EMS sector, potentially creating positive spillover effects across India's export-oriented industries.
Government Initiatives Strengthening Manufacturing Foundation
The Union Budget 2027 introduced significant measures to bolster India's electronics manufacturing ecosystem. Finance Minister Nirmala Sitharaman announced the launch of India Semiconductor Mission 2.0, a strategic initiative aimed at building a robust semiconductor and display manufacturing infrastructure. This move positions India as a potential global hub for electronics manufacturing and design.
Additionally, the government has expanded the Electronics Component Manufacturing Scheme (ECMS) to a net outlay of ₹40,000 crore. This expansion, coming less than a year after the program's initial rollout, underscores the administration's commitment to deepening electronics manufacturing capabilities and reducing import dependence.
In late January, Union Minister for Electronics and Information Technology Ashwini Vaishnaw highlighted that India's semiconductor design program has achieved significant milestones, enabling the nation to establish a stronger presence in the global chip industry.
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