NEW DELHI, Feb 3: India’s financial markets rallied sharply on Tuesday following a US-India trade deal that reduced tariffs on Indian goods from 50% to 18%, a move that analysts say removes a major overhang on the country’s stocks, bonds, and currency.
The benchmark Nifty 50 index surged nearly 5%, putting it about 100 points shy of its record high reached in January. The rupee strengthened over 1% to 90.40 per dollar in early trade, while the yield on the 10-year government bond fell by 5 basis points to 6.72%. The Nifty’s gain marked its biggest single-day jump in five years, and the rupee was on track for its strongest day since November 2022.
The deal, announced by US President Donald Trump on social media after a call with Prime Minister Narendra Modi, also includes India’s commitment to halt Russian oil purchases and lower trade barriers for US exports.
Indian equities and the rupee had been under pressure since Washington imposed steep tariffs in August 2025, making Indian assets among the worst-performing emerging market investments, with record foreign investor outflows.
“The trade deal announcement should lift a key overhang on Indian equities. Foreign investors who have been net sellers recently might now increase their exposure to India,” said Prashant Paroda, portfolio manager at AllSpring Global’s Intrinsic Emerging Market equities team.
Economists at Citi said the deal is expected to reduce geopolitical uncertainty that had kept investors cautious, noting that back to back trade agreements with the EU and the US address prior concerns of potential economic isolation.
The US pact follows a recent long awaited trade agreement with the European Union, which is set to eliminate or reduce tariffs on 96.6% of traded goods by value, further strengthening India’s global trade position.