Automobile, auto component makers surge on India-UK free trade agreement

Shares of automobile and auto component makers were trading higher in trade on Wednesday, May 7, after India and United Kingdom (UK) signed the much awaited free trade agreement (FTA) that will remove taxes on the export of labour-intensive products such as leather, footwear and clothing, while making imports of whisky and cars from Britain cheaper, in a bid to double trade between the two economies to $120 billion by 2030.

Following the agreement NIFTY Auto index rose as much as 1.50% in an otherwise lacklustre session. 12 out of fifteen shares in the NIFTY Auto index were trading higher led by Tata Motors' nearly 5% gain. Samvardhana Motherson, Bharat Forge, Bosch, TI India, Exide Industries and Mahindra & Mahindra also rose between 1-4.45%. These shares came under buying interest after tariffs on automotive imports will go from over 100% to 10% under quotas on both sides, benefiting companies such as Tata-JLR.

The deal opens massive export opportunities for labour-intensive industries and key sectors such as engineering goods, auto parts and engines, and organic chemicals, government said in a press release.

“India will gain from tariff elimination on about 99% of the tariff lines, covering almost 100% of the trade value, offering huge opportunities for an increase in bilateral trade between India and the UK,” government added.

The successful conclusion of the India-UK Free Trade Agreement, along with the double contribution convention, marks a 'significant milestone' and creates large opportunities for Indian companies to access new markets, a top official of two and three-wheeler manufacturer TVS Motor Company said.

The FTA between the two countries would help our British brand 'Norton' to scale faster, TVS Motor Company Managing Director Sudarshan Venu said.

"We applaud our PM's (Narendra Modi) vision to enhance India's trade links globally. It creates large opportunities for Indian companies like ours to expand further and access new markets. We really appreciate the effort taken by the government to make this historic India-UK Free Trade Agreement," he said in a company statement on Tuesday.

"Our British brand 'Norton' will launch later this year and this agreement will help us scale faster and leverage common supply chains. We are excited as we further progress towards Viksit Bharat," he added.

As of 2:06 pm, NIFTY Auto index was top sectoral gainer, up 1.26% at 23,024.35.