Trade Deal Sparks Rally
On February 3, 2026, India's financial markets experienced a remarkable uplift, with the Nifty 50 index soaring by 3% to reach 25834.6 points. This significant
gain was directly triggered by U.S. President Donald Trump's declaration of a reduced reciprocal tariff on Indian imports, stepping down from the previous 25% to a more favorable 18%. Simultaneously, the BSE Sensex 30 also witnessed a substantial increase, climbing to 84077.5 points. The Nifty 50's trading day was dynamic, opening at 26308.05, hitting a high of 26341.2, and then dipping to a low of 25641.3. This positive market reaction underscores the immediate economic implications of improved trade relations between the two nations. The announcement itself, made by President Trump via social media, highlighted a personal connection with Prime Minister Modi and a collaborative effort to enhance bilateral trade and address global issues. The reduction in tariffs is seen as a critical step in fostering greater economic cooperation and market access for Indian businesses.
Economic & Political Dynamics
The trade agreement was a key point of discussion between U.S. President Donald Trump and Prime Minister Modi, as detailed in President Trump's social media statements on February 2. Beyond trade, their conversation also touched upon ending the conflict in Russia and Ukraine, with Prime Minister Modi reportedly agreeing to reduce reliance on Russian oil and instead increase purchases from the United States and potentially Venezuela. President Trump expressed optimism that these shifts would contribute to resolving the ongoing conflict and saving lives. The U.S. President emphasized his friendship and respect for Prime Minister Modi, framing the trade deal as a direct outcome of their discussion and a testament to their ability to achieve significant outcomes. The commitment from India to 'BUY AMERICAN' at a substantially higher level, alongside agreements for over $500 billion in U.S. energy, technology, agricultural, coal, and other product purchases, signifies a profound strengthening of the U.S.-India relationship, poised for even greater synergy moving forward.
Market Performance Deep Dive
Following the initial announcement, both the BSE benchmark and the Nifty index continued their upward trajectory, demonstrating sustained investor confidence. The BSE benchmark surged by an impressive 4.205.27 points, marking a 5.14% increase to reach 85,871.73. Similarly, the Nifty saw a significant jump of 1,252.8 points, equivalent to a 4.99% rise, closing at 26,341.20. Among the top-performing companies within the Sensex, several prominent names like Adani Ports, Bajaj Finance, Bajaj Finserv, InterGlobe Aviation, and Reliance Industries experienced substantial gains, trading higher in the 3.7% to 7.2% range. In contrast, ITC was the sole laggard among the blue-chip stocks. This broad-based rally indicates that the trade deal's positive impact was widely felt across various sectors of the Indian economy, reflecting a strong market sentiment anticipating enhanced trade opportunities and economic growth.
Sectoral Gains Highlighted
The textile and leather industries emerged as significant beneficiaries of the India-U.S. trade deal, with stocks in these sectors witnessing dramatic price increases, some soaring as much as 20% on the morning of February 3, 2026. This surge was a direct response to the substantial reduction in U.S. reciprocal tariffs on Indian goods, a move that alleviates a major concern for export-oriented industries. For example, K.P.R Mill and Garware Technical Fibres both saw their shares jump by 20%, while Welspun Living gained 19.85%, Vardhman Textiles climbed 19.60%, and Trident rose by 19.52%. Further down the list, Raymond Lifestyle increased by 9.56% and Page Industries by 5.31%. The footwear and leather goods segment also showed strong performance, with Bhartiya International up 10.70%, Mayur Uniquoters up 7.39%, Bata India up 5%, and Metro Brands up 3.96%. This broad sectoral uplift highlights how the tariff reduction directly addresses a long-standing challenge for these labor-intensive sectors, which had previously faced difficulties in exporting to the U.S. due to a 50% tariff barrier. India's merchandise exports to the U.S. had previously declined in December 2025, underscoring the negative impact of high tariffs.
Market Sentiment Boost
The sentiment surrounding the Indian stock market received a significant boost, amplified by the recent U.S.-India trade agreement and an anticipated EU-India trade deal, alongside a growth-oriented budget. According to V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, this confluence of positive developments is expected to invigorate market sentiment and stimulate economic activity. The stock market, in its characteristic forward-looking manner, is already discounting these favorable events, suggesting a period of robust growth. This optimism is further supported by broader Asian market trends, where indices like South Korea's Kospi saw substantial gains, and Japan's Nikkei 225, Shanghai's SSE Composite, and Hong Kong's Hang Seng also traded higher. U.S. markets had also closed positively on the preceding Monday, February 2, 2026. While Foreign Institutional Investors offloaded equities worth ₹1,832.46 crore on February 2, Domestic Institutional Investors were net buyers, acquiring stocks worth ₹2,446.33 crore, indicating a strong domestic appetite for Indian equities amidst positive global cues and bilateral developments.
