In a significant boost for Indian exporters, auto ancillary stocks witnessed a robust rally during Tuesday's trading session on February 3, following the announcement of a much-anticipated trade deal between India and the United States. Key players such as GNA Axles, Delta Autocorp, Sterling Tools, Tube Investments of India, and Sibar Auto Parts were among the top gainers, reflecting heightened investor optimism.
Tariff Reduction and Market Impact
US President Donald Trump announced on Monday a reduction in reciprocal tariffs on Indian goods, lowering them to 18% from the previous 25%. This decision came after a conversation with Prime Minister Narendra Modi and includes the removal of an additional punitive 25% duty that was imposed due to India's crude oil purchases from Russia. This move alleviates a major overhang on the Indian stock market, which had dampened investor sentiment for several months.
The new 18% tariff rate provides India with a competitive edge, as other major Asian economies, including China, face higher US tariffs of 37%. This development has sparked a wave of positivity across financial markets, with sectors heavily exposed to the US, such as auto ancillaries, experiencing significant traction. The US accounts for approximately 25–30% of export revenues for these companies, making the tariff cut particularly impactful.
Stock Performance Highlights
Among individual stocks, GNA Axles led the surge with a remarkable 20% jump to ₹425. Other notable gainers included Delta Autocorp, Sterling Tools, Balkrishna Industries, Bhagwati Autocast, Tube Investments of India, Sibar Auto Parts, NDR Auto Components, Sona BLW Precision, Steel Strips Wheels, Belrise Industries, and Rolex Rings, which saw increases ranging from 4.5% to 11.5%. The Nifty Auto index opened 3% higher, underscoring the broad-based enthusiasm in the sector.
Expert Insights on Export Viability and Margins
Divam Sharma, co-founder and fund manager at Green Portfolio PMS, described the trade deal as serendipitous, especially given market expectations. He emphasized that the tariff reduction is a positive development for India's auto sector, particularly component makers, as it lowers trade barriers and enhances cost competitiveness. This strengthens India's position in global OEM supply chains, although vehicle exporters may see modest benefits due to limited direct exposure.
Anil Rego, founder and fund manager at Right Horizons PMS, noted that the benefits are more visible for component manufacturers integrated into global supply chains. Lower trade barriers improve export viability to US OEMs, support long-term sourcing relationships, and help protect margins that were previously compressed by tariff costs. Over time, this could reinforce India's role as a cost-efficient and reliable manufacturing base for global automotive supply chains.
Brokerage Perspectives and Earnings Outlook
Domestic brokerage firm Axis Direct highlighted that auto ancillary companies are better positioned to benefit from the tariff reduction than vehicle manufacturers, thanks to their higher export intensity, contractual supply arrangements, and minimal reliance on end-market pricing actions. In contrast, gains for OEMs are constrained by regulatory entry barriers and distribution economics.
The brokerage added that while tariffs remain above long-term averages, the downward revision materially eases profitability and earnings pressures. It improves earnings visibility for FY27–FY28 and supports valuation comfort for US-linked automobile exporters, with the impact skewed decisively towards the auto ancillary segment.
Broader Trade Context and Market Sentiment
The India-US trade deal follows multiple rounds of negotiations since March, with the most recent informal discussions held in New Delhi during a December visit by a trade team headed by the Deputy US Trade Representative. This announcement coincides with India and the European Union concluding a long-awaited free trade agreement in January, further bolstering trade optimism.
The trade deal has lifted market spirits, allowing investors to look past unexpected announcements in the Union Budget 2027, which had previously sent the Nifty 50 to a four-month low. Sectors with significant US exposure are now witnessing renewed interest, driven by improved export prospects and enhanced global competitiveness.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
