What Modi-Trump ‘MEGA’ Talks Mean for Markets

 A lot happened on February 13, 2025, when Indian Prime Minister Narendra Modi and US President Donald Trump met at the White House. Amid the heated tariff debate globally, the duo set the stage for a new era in defence, trade, AI, and energy between the two countries. 

To top it off, PM Modi cleverly remarked that while Trump’s slogan was “Make America Great Again” (MAGA), India was all about “Make India Great Again” (MIGA)— equalling a ‘MEGA’ partnership aimed at fostering prosperity for both nations.

The leaders of the world’s two largest democracies weren’t just exchanging pleasantries—they were talking big money moves. The goal? Doubling US-India trade to $500 billion and ramping up defence deals, among other strategic partnerships. But while the politicians shook hands, back at home, the Indian stock market had a rollercoaster ride. 

Let’s understand why.

Market Reaction: Investors Fretted

Turns out, markets weren’t feeling the love post the Modi-Trump bonanza. On February 14, 2025, Dalal Street dipped as investors analysed the meeting’s outcomes:

• Sensex dropped 0.26% to end at 75,939.21 points. 
• The broader NSE Nifty 50 index declined 0.44% to close at 22,929.25 points.
• Broader market indices, including small-cap and mid-cap stocks, were already under pressure, falling 3.6% and 2.4%, respectively.

According to data, the Nifty and Sensex lost about 2.5% during the 10-14 February week, their worst performance in 2025.

• FIIs (Foreign Institutional Investors) pulled out ₹4,295 crore, cautious about global trade uncertainties. 
• DIIs (Domestic Institutional Investors) tried to hold the fort, pumping ₹4,364 crore into select sectors.
• The Indian Rupee strengthened slightly, closing at ₹86.82/USD on February 14, 2025, its best level in 18 months.
• 10-year bond yield held steady at 6.71% as investors awaited clarity on the RBI’s next move.

Why the mixed reaction? While defence and trade talks signalled bullishness, FPIs (foreign portfolio investors) saw overvaluation risks, the global oil situation, and the implications of Trump’s plans to impose reciprocal tariffs. This brings us to the next section: What are these reciprocal tariffs? 

Tariff Pe Tariff

It’s all about tariffs since the time Trump assumed office in January. And now, the word has a prefix to it – Reciprocal. 

Trump’s reciprocal tariff plan (set at 25%) is Direct which means that if a country imposes higher tariffs on American goods, the US will match those tariffs on imports from that country. For example, if India levies a 25% tariff on American agricultural products, the US will impose an equivalent 25% tariff on Indian exports.

The goal of this policy is to eliminate trade imbalances and pressure countries into lowering their tariffs on American goods, ultimately making trade more “fair” and balanced from a US perspective. However, this could lead to retaliatory tariffs from affected countries, like India, escalating trade tensions. 

TL;DR: Investors are fretting over the implications of Trump’s reciprocal tariffs plan, which analysts say could hurt the country the most among its Asian peers and trigger further foreign outflows, potentially affecting domestic equities.

But here’s a catch: Reciprocal tariffs won’t kick in until an April 1 review of other countries’ trade practices. That gives PM Modi time to start negotiating a trade deal. To combat such retaliatory measures, PM Modi, in his meeting with Trump, offered to discuss easing tariffs, buying more US oil and gas, combating aircraft, and making trade concessions.

India-US Trade Ties – A Snapshot
In 2024, the total trade between the US and India was about $129.2 billion.

• The US exported goods worth $41.8 billion to India, which was 3.4% ($1.4 billion) more than in 2023.
• The US imported goods worth $87.4 billion from India, increasing by 4.5% ($3.7 billion) compared to 2023.
• This led to a trade deficit of $45.7 billion for the US, which was 5.4% ($2.4 billion) higher than in 2023.
  Source: https://ustr.gov/countries-regions/south-central-asia/india

US-India Meet: Sector-wise Impact

Defence Stocks: Ready for Takeoff?

With talks of F-35 fighter jet sales and a 10-year defence partnership, defence stocks saw initial gains, but profit-booking later took over.

Stocks like Bharat Electronics Ltd and Hindustan Aeronautics Ltd gained intra-day before cooling off, while Mazagon Dock and Bharat Dynamics ended flat on February 14, 2025 as markets waited for concrete deal signings, according to BSE, NSE data.

The potential acquisitions of advanced platforms like F-35 fighter jets, Javelin anti-tank missiles, and Stryker armoured vehicles will modernise India’s armed forces and enhance its defence capabilities.

Pharma Sinks

The pharmaceutical sector experienced a decline, with the Nifty Pharma index dropping the most by 2.7% on February 14, 2025. This downturn is attributed to investor concerns over potential pricing pressures and regulatory challenges in the US market. However, the move could create new opportunities from tariffs on Chinese APIs in the long run.

IT & AI Stocks: The Hype Didn’t Compute

Modi and Trump spoke about AI collaboration under the TRUST initiative (Technology, Research, Upliftment, and Secure Trade), but IT stocks remained cautious, waiting for concrete deals and investments.

Infosys, TCS, and HCL Tech saw marginal declines, while AI-focused stocks such as Tata Elxsi showed some intraday gains before retreating, according to BSE, NSE data from February 14, 2025. However, the overall IT sector reaction has mainly been positive, recouping some losses after the meeting so far.

Why it matters: India has started acquiring nearly 19,000 GPUs and subsidising them for start-ups and researchers. Meanwhile, in the US, companies like OpenAI, SoftBank, Oracle, Microsoft, and NVIDIA are collaborating to develop AI infrastructure for OpenAI. All this is happening alongside the rapid rise of DeepSeek, a low-cost AI model from China, which has disrupted the industry. Thus, the TRUST initiative could strengthen AI ties between India and the US, opening new opportunities for Indian IT firms.

Energy Stocks: An Oily Situation

The US’s push for India to purchase a large amount of their oil and gas has created volatility in energy stocks. Share prices of major companies, such as ONGC and Reliance Industries, and renewable energy players, such as Adani Green and Tata Power, fluctuated on February 14, 2025. 

Let’s understand the context: According to India’s official trade data, Russia is currently the leading supplier of crude to India, while Qatar is the biggest provider of liquefied natural gas (LNG). The US is the world’s largest LNG exporter and accounted for about a fifth of India’s supplies in 2024.

However, from the long-term perspective, the announcement of stronger trade ties and increased energy imports will likely boost market sentiment toward oil and gas stocks. Investors may view these developments as opportunities for growth in companies involved in energy procurement and distribution, especially given India’s status as one of the world’s largest consumers of crude oil.

Broader Implications: What Investors Should Watch

Trade: A $500 Billion Dream or Reality?

The biggest headline from the meet was the goal to double US-India trade to $500 billion. But will it happen overnight? Nope. Investors should watch tariff negotiations as the US pushes for lower automobile and agricultural tariffs.

Defence Deals

A long-term defence framework could increase orders for HAL, BEL, L&T, and Bharat Dynamics. However, markets will remain cautious until actual contracts are signed.

AI & Tech: India’s Make-or-Break Moment

With the US and India discussing AI collaboration, IT stocks could see long-term tailwinds. But for now, investors must watch government policies on AI development in India.

Final Thoughts

While the Modi-Trump ‘bromance’ set the stage for a new economic chapter, markets remain cautiously optimistic. The big deals sound exciting, but investors need patience to see actual execution. For now, it’s time to watch, wait, and strategically invest in the right sectors.

One thing’s for sure—this meeting has set the wheels in motion for something MEGA!