Markets – Indian Stocks Rally Nearly 3% After Landmark India-US Trade Agreement
Markets – Indian equity benchmarks opened sharply higher on Tuesday, reflecting a wave of optimism after India and the United States announced a long-awaited bilateral trade agreement that offers immediate tariff relief and improves export prospects.
The benchmark Sensex surged by nearly 3 per cent in early trade, rising 2,421 points to reach 84,088 by 9:25 am. The Nifty followed a similar trajectory, climbing 741 points, or 2.96 per cent, to trade at 25,829. Buying interest was widespread, with investors actively picking up stocks across market segments.
Trade Agreement Sparks Market Confidence
Investor sentiment was buoyed by confirmation that India and the US have agreed to reduce reciprocal tariffs on Indian goods to 18 per cent from the earlier 25 per cent. The deal also removes the additional 25 per cent duty imposed on purchases of Russian crude oil. According to official statements, the agreement takes effect immediately.
US President Donald Trump confirmed the development following a late-night phone conversation with Prime Minister Narendra Modi, describing the agreement as a decisive step toward strengthening economic ties. Market participants had been closely watching the negotiations, with the delay in finalisation previously weighing on equities.
Broader Market Sees Strong Participation
The rally was not limited to large-cap stocks. Broader indices also posted solid gains, indicating healthy participation from retail and institutional investors. The Nifty Midcap 100 advanced 3.10 per cent, while the Nifty Smallcap 100 climbed 3.25 per cent, reflecting confidence in growth-oriented companies.
Analysts noted that the broad-based nature of the rally suggests improving risk appetite, supported by expectations of stronger earnings growth and increased export opportunities.
Sectoral Indices Register Robust Gains
All major sectoral indices traded firmly in positive territory. Realty stocks led the advance with gains of over 4 per cent, supported by expectations of sustained demand and improved financing conditions. Auto shares rose nearly 3.8 per cent, while consumer durables and information technology stocks gained 3.69 per cent and 3.04 per cent, respectively.
Market participants pointed out that IT stocks benefited from improved outlooks for US-linked revenues, while domestic consumption-focused sectors gained on expectations of economic acceleration.
India Gains Competitive Edge on Tariffs
With the revised tariff rate of 18 per cent, India now enjoys a cost advantage over several export-focused Asian economies. Countries such as Bangladesh, Sri Lanka, Taiwan, and Vietnam face tariffs of 20 per cent, while Indonesia, Malaysia, Thailand, the Philippines, and Pakistan are subject to 19 per cent duties.
This relative advantage is expected to support Indian exporters, particularly in manufacturing and technology-linked sectors, over the medium term.
Outlook for Growth, Currency, and Capital Flows
Market observers believe the trade agreement could lift India’s economic growth rate to around 7.5 per cent in FY27, supported by stronger exports to the US. Corporate earnings, which have already shown signs of recovery, may grow between 16 per cent and 18 per cent during the same period.
Analysts also expect the rupee to strengthen, aided by improving trade dynamics and the combined impact of the US-India deal, the EU-India trade agreement, and a growth-focused Union Budget. These factors could attract fresh foreign capital inflows and improve India’s balance of payments position.
Global Markets Offer Supportive Cues
Asian markets also traded higher, reinforcing positive sentiment. Japan’s Nikkei jumped over 3 per cent, while South Korea’s Kospi surged more than 5 per cent. China’s Shanghai and Shenzhen indices posted modest gains, and Hong Kong’s Hang Seng Index edged higher.
Overnight, US markets closed mostly in positive territory. The Nasdaq Composite rose 0.56 per cent, the S&P 500 gained 0.54 per cent, and the Dow Jones Industrial Average advanced 1.05 per cent.
Institutional Activity Remains Mixed
On February 2, foreign institutional investors were net sellers, offloading equities worth Rs 1,832 crore. In contrast, domestic institutional investors provided support, purchasing shares worth Rs 2,446 crore, helping offset overseas selling pressure.