Trade Deal Sparks Rally
On February 3, 2026, India's stock exchanges witnessed an extraordinary surge, with major indices climbing significantly. This impressive market performance
was directly triggered by the announcement of a new trade agreement between India and the United States. The core of this breakthrough was the U.S. decision to slash reciprocal tariffs on Indian goods down to a mere 18 percent. This marked a substantial decrease from the previously imposed 50 percent duties, which had been a point of contention and had at times escalated even higher due to geopolitical considerations. The resolution of these tariff disputes significantly eased a major concern for investors, thereby improving the outlook for corporate earnings, particularly for companies heavily involved in exports. The reduction in trade-related uncertainties and the establishment of clearer trade relations were widely seen by analysts at leading brokerage firms as catalysts likely to attract a renewed influx of foreign capital into Indian financial assets.
Market Indices Soar
The impact of the India-US trade agreement on the Indian market was immediate and widespread. The benchmark BSE Sensex experienced a dramatic upward movement, gaining as much as 2,288.84 points and approaching the significant milestone of 83,948 during midday trading. Concurrently, the Nifty 50 index recorded a robust gain of nearly 2.8 percent, bringing it tantalizingly close to its all-time high levels. Beyond equities, the Indian rupee also showed considerable strength, appreciating by over 1 percent to trade around Rs 90.4 against the U.S. dollar. This appreciation of the rupee reflected increased investor confidence and a healthier balance of payments outlook. Furthermore, the yield on 10-year government bonds saw a decline, a clear indication that market participants perceived reduced risks and improved economic stability. This positive sentiment permeated across various segments of the financial markets, signaling a broad-based recovery and growth.
Export Sectors Shine
The beneficial effects of the reduced tariffs were particularly pronounced in India's export-oriented industries. Sectors such as textiles, gems and jewellery, auto ancillaries, and engineering goods experienced substantial buying interest. The direct reduction in import duties by the U.S. significantly enhanced the price competitiveness of Indian products in the American market. This improved competitive edge is expected to translate into higher sales volumes and improved profit margins for businesses in these segments. Experts in the financial domain characterized this trade deal as a pivotal development that effectively dismantled a long-standing policy hurdle. By lowering trade barriers, the agreement not only bolsters the potential for increased exports but also fosters a more positive market atmosphere, encouraging both domestic institutional investors and foreign portfolio investors to increase their allocations to Indian equities.
