Trade deals shift sentiment, boost growth prospects: RBI

Mumbai: Investor sentiment in India improved after the completion of India-EU free trade negotiations in end-Jan and the subsequent interim trade agreement with the US, which lifted financial flows and supported markets through trade access, capital inflows, and policy stability, an RBI report said.

RBI's state of the economy report said the domestic economic landscape in Feb 2026 is witnessing a turnaround in investor sentiment. The report highlighted a pivot in financial flows. While the Indian equity market remained "subdued in Jan 2026 amid tariff uncertainties," it "rebounded in early Feb, buoyed by the announcement of the India-US interim trade deal". It said "foreign portfolio investments and the Indian rupee staged a comeback" in Feb. In the first half of the month, net FPI recorded inflows amounting to $2.3 billion, the report said. The "rupee also bounced back as net FPI flows turned positive," recovering from "its Jan lows".

The report said equity markets received a "boost through the India-EU trade deal towards the end of the month" and were further supported by "strong corporate earnings results for Q3 FY26". According to RBI, the trade agreements are expected to play a "significant role in the coming years" by "improving market access."