India-EU FTA Boosts Auto Sector, Markets Open Firm on Export Optimism

Within the auto segment, morning trades reflected a mixed performance among major manufacturers. At the time of filing, Maruti Suzuki saw its share price at 14,907.80, a decline of 2.19 per cent, while Mahindra & Mahindra (M&M) remained nearly flat at 3,393.20, down 0.03 per cent. In contrast, Hyundai traded slightly higher at 2,176.00, gaining 0.12 per cent, and Tata Motors Passenger Vehicles (TMPV) showed resilience at 344.00, up 1.01 per cent.

The automotive landscape is undergoing a significant shift due to the India-EU Free Trade Agreement (FTA). Experts highlight that the deal reshapes the landscape for the Indian automotive sector. While initial attention often centers on luxury car imports, the core economic impact involves deeper integration into global supply chains.

Banking and Market Expert Ajay Bagga stated, "The India-EU Free Trade Agreement (FTA), is a landmark deal that reshapes the landscape for the Indian automotive sector. While the headlines often focus on cheaper luxury cars, the 'real' economic benefits for Indian companies lie in exports, technology transfers, and global supply chain integration."

Export potential remains a central theme for auto ancillary companies as the EU prepares to eliminate tariffs on Indian components over the next five to ten years. These duties currently range from 3 per cent to 15 per cent. Bagga noted, "Removing them makes Indian parts significantly more price-competitive against rivals from China and ASEAN countries." This shift allows Indian suppliers to deepen their presence in Europe, which is already the top export destination for Indian components, "exceeding $3.7 billion in the first half of fiscal year 2026."

The agreement also positions India as a manufacturing hub for European brands. Global chief executives from firms like Renault and Volkswagen indicated that the FTA signals a move toward manufacturing more models in India for export back to Europe and other global markets.

Bagga added, "The deal incentivizes European carmakers to use India as a global manufacturing base rather than just a sales market." He noted that to protect domestic players like Tata Motors and Mahindra & Mahindra, the government implemented price thresholds where tariff cuts only apply to vehicles with a landed value above USD 15,000.

Broad market sentiment remains cautiously optimistic despite headwinds such as rupee pressure and foreign portfolio investor selling. Ponmudi R, CEO of Enrich Money, observed that Indian equity markets were expected to open on a firm note, extending a late-session recovery.

He noted that the Nifty 50 has staged a measured rebound, holding near 25,175 and showing resilience above key support levels. Momentum indicators show early improvement, with the Relative Strength Index recovering from oversold levels.

- ANI