India-US Trade Deal: Here what Jefferies is betting on and its model portfolio changes

Brokerage firm Jefferies said the India-US trade deal is positive for investor sentiment, as it sharply lowers tariff barriers between the two countries. Tariffs on India's exports to the US have been reduced to 18% from 50%, while tariffs on US exports into India have been brought down to zero, assuming most agricultural products remain excluded.

India had been facing steep tariffs since September 2025, including a 25% reciprocal levy and an additional 25% linked to Russian oil trade.

Jefferies said that the latest agreement brings effective tariffs down to 18%, which is 1-2 percentage points lower than those faced by key competitors such as Pakistan and Vietnam, particularly for labour-intensive exports like textiles, leather goods, gems and jewellery.

The brokerage expects sectors such as auto ancillaries, solar manufacturing, chemicals, textiles and Adani Group companies to be among the key beneficiaries of the deal.

Jefferies has added Eternal, an FPI favourite, to its model portfolio, while also increasing exposure to metals and trimming its allocation to IT stocks.

FPI sentiment remains negative

Jefferies pointed out that concerns around the lack of AI-led growth opportunities, a weak rupee and the absence of a trade deal with the US had weighed heavily on investor sentiment towards India.

Foreign portfolio investors have pulled out $34 billion from Indian markets over the past 16 months.

An analysis of 63 emerging market funds with assets under management of $330 billion shows that India's relative weight has slipped below benchmark levels, with nearly 60% of these funds currently underweight on India.

The brokerage believes the rupee outlook should improve meaningfully going ahead.

The US remains India's largest export destination for goods, accounting for $87 billion or 18% of total exports. Jefferies said the trade deal improves prospects for labour-intensive sectors such as textiles.

Along with recent free trade agreements signed with the EU, the UK and other regions, the rupee could see a near-term boost, potentially acting as a trigger for renewed FPI inflows.

Stocks and sectors likely to benefit

According to Jefferies, stocks and sectors with high exposure to the US market or sensitivity to changes in crude sourcing stand to gain.

These include auto components such as Sona Comstar and Bharat Forge, chemical companies like Navin Fluorine, PI Industries and SRF, solar players including Waaree, Premier Energies and Emmvee, textile major Welspun Living, and Adani Group companies.

However, the brokerage cautioned that if imported oil or gas from the US turns out to be more expensive on a landed basis, it could be a negative for oil marketing companies.

Model portfolio changes

Jefferies said it has reduced its IT exposure and increased its allocation to metals, taking materials to an overweight stance after recent weakness in the sector.

The brokerage said that Hindustan Zinc and JSW Steel are its preferred picks.

Hindustan Zinc offers attractive exposure to silver and zinc, driven by a strong cost advantage. With spot silver prices around 50% above the December quarter average, Jefferies expects EBITDA growth of 41% in FY27.

JSW Steel is expected to see a sharp sequential improvement in earnings as domestic steel prices rise following safeguard duties and China's anti-dumping measures.

The brokerage estimates JSW Steel's EBITDA to rise 34% quarter-on-quarter in the March quarter and 45% year-on-year in FY27.

Jefferies has also replaced Godrej Consumer Products with Eternal in its model portfolio, citing strong growth and margin expansion across quick commerce and food delivery.

The stock is currently trading around 25% below its peak, improving its risk-reward profile.

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