India-EU Free Trade Agreement: The India-EU Free Trade Agreement has set the stage for a meaningful shift in sectoral leadership across Indian equities. It is expected to drive a structural shift in sectoral leadership across Indian equities, covering economies that together account for nearly 25% of global GDP and 33% of global trade. Market participants see the pact as a long-term re-rating trigger rather than a short-term trading catalyst.

According to Elara Securities, the deal comes amid uncertainty around US trade policy and geopolitical realignments, and could act as a partial hedge against external headwinds, though gains will accrue gradually. Exports to the EU already form 17.8% of India’s total exports, almost matching the 18.3% share of the US.

The agreement targets tariff liberalisation across 90–95% of traded goods, with immediate duty removal on over 70% of EU tariff lines. Elara Securities estimated this could add 25–30 bps to nominal GDP growth, but cautioned that the pact will become operational only from early 2027, limiting near-term earnings impact.

“The India-EU deal can act as a hedge against any drag on the economy due to US tariffs, albeit with a lag,” the report noted, adding that the agreement should be seen as a long-term diversification of export destinations rather than a near-term earnings windfall

Sector-wise stocks to watch post India-EU trade deal by Elara Securities

Textiles & Apparel – KPR Mill, SP Apparel, Arvind, Indo Count Industries, Welspun Living

Pharmaceuticals & APIs – Divi’s Laboratories, Laurus Labs, Aurobindo Pharma, Dr Reddy’s Laboratories, Zydus Lifesciences, Granules India, Sun Pharma, Biocon

Chemicals & Specialty Chemicals – SRF, Gujarat Fluorochemicals, Navin Fluorine, Jubilant Ingrevia, Vinati Organics, Privi Speciality

Leather & Footwear – Mirza International, Liberty Shoes

Diagnostics & Medical Devices – Dr Lal PathLabs, Metropolis Healthcare, Vijaya Diagnostics, Thyrocare, Polymed, Sahajanand Medical Technologies

Ports & Logistics – Adani Ports and SEZ, JSW Infrastructure

Defence & Aerospace – Cochin Shipyard, Mazagon Dock Shipbuilders, GRSE, L&T, Azad Engineering, MTAR Technologies, Dynamatic Technologies, Axiscades Technologies

Autos (Neutral-Positive) – Maruti Suzuki, Mahindra & Mahindra, Tata Motors

Alcobev (Negative) – Radico Khaitan, Piccadilly Agro

Capital Goods (Negative) – Jyoti CNC Automation

Why some sectors gain — and others face pressure

Elara Securities identified textiles and apparel as the most visible beneficiaries of the India-EU FTA. The brokerage highlighted that zero-duty access eliminates EU tariffs of up to 12%, allowing Indian exporters to compete on equal terms with Bangladesh and Pakistan, which had gained market share between 2018 and 2024 due to preferential access. It pointed out that India’s textile exports to the EU stand at around $7.2 billion, against an EU import market exceeding $260 billion, offering significant headroom for growth.

In pharmaceuticals, APIs and specialty chemicals, Elara Securities expects meaningful improvement in competitiveness. The brokerage noted that preferential access and tariff elimination on nearly 97% of Indian chemical exports would enhance pricing power versus China and Eastern Europe, enabling either margin expansion or volume-led gains.

“Preferential FTA access improves regulatory cooperation and lowers approval friction, enabling Indian generics and APIs to scale EU dossiers and diversify beyond the US,” Elara Securities said.

Moreover, Elara also flagged diagnostics and medical devices as beneficiaries, as tariff reductions improve cost competitiveness in high-volume, price-sensitive segments such as consumables, clinical chemistry and immunoassays, supporting tender wins and scale economics. The brokerage further added that ports and logistics players stand to gain indirectly, as most of the incremental India-EU trade will move via containerised cargo through seaports, supporting throughput growth and utilisation.

On the auto sector, Elara Securities maintained a largely neutral stance. While import duties on EU vehicles will fall from 110% to 10% under a quota-based framework, the brokerage noted that most EU OEM imports already enter India as CKD kits at 15% duty, limiting incremental impact. It highlighted that EU OEMs account for only about 4% of India’s auto market and said recent corrections in Maruti Suzuki and Mahindra & Mahindra should be viewed as buying opportunities rather than structural threats.

For auto ancillaries, Elara Securities sees limited immediate upside, as the deal does not provide relief from the EU’s Carbon Border Adjustment Mechanism (CBAM), which continues to constrain exports of metal-intensive components. Any meaningful benefit, the brokerage said, would depend on future CBAM concessions.

On the downside, Elara Securities flagged capital goods as facing higher competitive intensity, as tariff reductions on EU machinery and electrical equipment narrow the cost advantage enjoyed by domestic suppliers. Alcobev was identified as another pressure point, with import duties on European spirits cut to around 40–50% from 110–150%, potentially intensifying competition for premium domestic brands such as Radico Khaitan and Piccadilly Agro.

Unlike the UK FTA, Elara noted, the EU deal is product-led rather than margin-accretive.

Summing up, Elara Securities said the benefits of the India-EU FTA should be evaluated over the next few years rather than quarters.

“The deal should make India more competitive as a global trade participant,” the brokerage said, while cautioning investors to focus on sector-specific execution and stock selection rather than broad-based optimism.

Disclaimer: 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.