Market Milestones Achieved
Indian benchmark indices experienced an extraordinary upswing, with the BSE Sensex climbing an impressive 2,072.67 points, concluding at 83,739.13, a 2.54%
gain. Simultaneously, the Nifty 50 soared by 639.15 points, reaching 25,727.55, also a 2.55% increase. Earlier in the trading session, the Sensex had reached an intraday peak of 85,871.73, a 5.1% surge, while the Nifty 50 peaked at 26,341.2, marking a 5% advance. This widespread buying frenzy led to a significant boost in investor wealth, with the total market capitalization of BSE-listed companies expanding by over ₹12.5 lakh crore, from ₹455 lakh crore to ₹467.35 lakh crore in a single day.
Trade Deal's Impact
The primary catalyst for this remarkable market performance was the announcement of a long-anticipated trade agreement between India and the United States. This pact effectively addressed tariff-related concerns that had previously cast a shadow over domestic equities, leading to a significant improvement in market sentiment, particularly among Foreign Institutional Investors (FIIs). Analysts suggest that this positive development, coupled with the possibility of the Nifty 50 reaching fresh all-time highs and a strengthening Indian Rupee, signals a robust bull trend. The resolution of these trade uncertainties has revitalized investor appetite for Indian assets.
Benefiting Sectors Identified
The India-US trade deal is poised to provide a substantial boost to export-oriented sectors. Experts anticipate that industries such as textiles and apparel, gems and jewellery, leather goods, marine and seafood (especially shrimp), auto ancillaries, engineering goods, and specialized chemicals are likely to be key beneficiaries. Furthermore, select electronics and consumer goods companies could also see positive impacts. While not directly tied to the tariff reductions, the pharmaceutical and IT/services sectors are also expected to experience an indirect boost in sentiment due to the overall positive economic outlook fostered by the agreement.
Tariff Reductions Unveiled
The landmark trade agreement between India and the US involves significant reciprocal tariff adjustments. Washington has reduced its tariffs on specific Indian goods from 50% down to 18%. In return, India has committed to lowering tariffs and addressing non-tariff barriers on a range of American products. This breakthrough was crucial in mitigating a major source of uncertainty that had made foreign investors hesitant, contributing to a period of underperformance in Indian equities. The Nifty had experienced a notable decline of over 1,000 points in January, partly due to heavy selling by foreign portfolio investors.
Currency Strength and FII Activity
Adding to the market's positive momentum, the Indian Rupee showed signs of strengthening against the US Dollar, opening at 90.40 compared to its previous close. This currency appreciation provides an additional layer of comfort, helping to absorb some of the pressure from global market volatility. The recent rebound was also amplified by short covering activity from Foreign Institutional Investors (FIIs). With bearish positions reportedly near 90%, traders actively unwound their short bets as indices recovered from oversold levels and the Nifty reclaimed the significant 26,000 mark, indicating a shift in market sentiment.
Key Stocks Drive Gains
The rally was spearheaded by heavyweight large-cap stocks, demonstrating broad-based participation. Major corporations like Reliance Industries saw a nearly 4% increase, while Adani Ports experienced a substantial surge of approximately 8%, providing significant momentum to the benchmark indices. Other prominent companies such as HDFC Bank, L&T, Bajaj Finance, ICICI Bank, Infosys, and Eternal also posted gains of up to 5%. This upward movement was further supported by optimism surrounding the Union Budget 2026's focus on capital expenditure, which has bolstered expectations for improved order flows for these companies.
Medium to Long-Term Outlook
Looking ahead, the India-US trade deal is projected to yield positive outcomes for export-centric businesses in the medium to long term. Sectors such as automotive, information technology, textiles, pharmaceuticals, and gems and jewellery are particularly well-positioned to benefit. Companies within these segments are anticipated to report strong quarterly financial results in the upcoming periods, driven by enhanced trade opportunities. Market participants are likely to price in this positive outlook even before these robust earnings are officially announced, reflecting a proactive market sentiment.
Global Market Support
The domestic market rally was also supported by positive cues from global equity markets. In the US, the Dow Jones saw a rise of roughly 515 points (1.05%), the S&P 500 gained 0.5%, and the Nasdaq advanced approximately 0.6%. Asian markets also exhibited a strong upward trend, with Japan's Nikkei jumping around 3% and South Korea's Kospi soaring over 5%. Hong Kong's Hang Seng and China's CSI 300 recorded modest gains, while Australia's S&P/ASX 200 climbed 1.3% following a 25 basis point interest rate hike by the Reserve Bank of Australia. These international trends provided a favorable backdrop for the Indian market's advance.
Investment Recommendations
In light of the India-US trade deal and the reduction in tariffs, several sectors have emerged as attractive investment avenues. Analysts recommend focusing on companies within the auto, IT, pharma, textile, and defence industries. Specific stock recommendations include Aurobindo Pharma, Cipla, and Glenmark Pharmaceuticals in the pharma sector; BEL, HAL, and Cochin Shipyard for defence; TechM, HCL Tech, Wipro, and Infosys in IT; Trident and Welspun Living for textiles; and Eicher Motors, Tata Motors, TVS Motor, Bajaj Auto, JBM Auto, Bosch, Amara Raja, and Exide Industries within the auto and auto ancillary segments. These selections are based on the anticipated benefits from the trade agreement.
