Tag Archives: US-India trade deal

Sensex Soars Over 2,400 Points as Markets Cheer India–US Trade Deal

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Indian equity markets staged a powerful rally on Tuesday morning, surging nearly 3 per cent in early trade, as investors reacted enthusiastically to the announcement of the India–US trade deal that promises immediate tariff relief for Indian exports.

By 9.25 a.m., the Sensex had jumped 2,421 points, or 2.97 per cent, to 84,088, while the Nifty climbed 741 points, or 2.96 per cent, to 25,829, marking one of the strongest single-session opening rallies in recent months.

The sharp upmove followed confirmation that India and the United States have agreed to a trade arrangement under which reciprocal tariffs on Indian goods will be cut to 18 per cent from 25 per cent. In addition, the extra 25 per cent duty imposed on India over its purchases of Russian crude oil will be scrapped. U.S. President Donald Trump said the agreement would be “effective immediately” after a phone call with Prime Minister Narendra Modi late on Monday, delivering instant relief to exporters and markets.

The rally was broad-based, extending well beyond frontline stocks. The Nifty Midcap 100 index surged 3.10 per cent, while the Nifty Smallcap 100 rose 3.25 per cent, signalling renewed risk appetite across market segments that had remained under pressure amid trade uncertainty.

All sectoral indices traded firmly in the green, led by realty, auto, consumer durables and information technology. The realty index jumped 4.47 per cent, auto rose 3.78 per cent, consumer durables gained 3.69 per cent, and IT stocks advanced 3.04 per cent, reflecting expectations of stronger demand, improved export competitiveness and higher earnings visibility.

At 18 per cent, India’s new U.S. tariff rate now undercuts that of several key export-oriented Asian economies. Bangladesh, Sri Lanka, Taiwan and Vietnam face tariffs of 20 per cent, while Indonesia, Malaysia, Thailand, the Philippines and Pakistan are subject to tariffs of 19 per cent. Market participants said this relative advantage could help Indian exporters gain market share in labour-intensive and manufacturing segments.

Technically, analysts said immediate support for the Nifty lies in the 25,600–25,800 zone, while resistance is seen at 26,200–26,350. A sustained move above these levels could open the door to further upside, they added.

“The dramatic announcement of the long-awaited US–India trade deal and the US decision to cut tariffs on India from 50 per cent to 18 per cent is a game changer for the Indian economy and stock markets as its delay was the single important factor weighing on the markets,” an analyst said, underscoring how prolonged uncertainty had capped valuations.

Market watchers said the deal could lift India’s growth trajectory, with GDP growth seen rising to around 7.5 per cent in FY27, supported by stronger exports to the U.S. Corporate earnings, which are already showing signs of revival, could accelerate to 16–18 per cent growth in FY27, aided by improved demand conditions and operating leverage.

Rupee Rebounds 

Analysts also expect the rupee to rebound sharply in the near term. They said the combined impact of the US–India trade deal, the recently concluded EU–India trade agreement, and the growth-focused Union Budget has materially improved India’s macro outlook. The positive sentiment could trigger renewed foreign capital inflows, potentially strengthening India’s Balance of Payments position.

Large-cap stocks in banking, non-banking financials, telecom, capital goods and IT — sectors traditionally favoured by foreign institutional investors — are expected to attract significant inflows if risk-on sentiment sustains, market participants said.

Global cues were largely supportive. In Asia, China’s Shanghai Composite rose 0.38 per cent and Shenzhen gained 0.93 per cent. Japan’s Nikkei jumped 3.23 per cent, South Korea’s Kospi surged 5.04 per cent, while Hong Kong’s Hang Seng edged up 0.11 per cent.

U.S. markets had ended the previous session mostly higher, with the Nasdaq gaining 0.56 per cent, the S&P 500 advancing 0.54 per cent, and the Dow Jones Industrial Average adding 1.05 per cent.

Despite the sharp rally, data showed that foreign institutional investors remained net sellers on February 2, offloading equities worth ₹1,832 crore. Domestic institutional investors, however, continued to provide strong support, with net purchases of ₹2,446 crore, cushioning the market ahead of the trade deal announcement.

The scale and breadth of Tuesday’s rally suggest that investors are now repositioning for a post-tariff-reset environment, with expectations of stronger growth, improved earnings visibility and renewed foreign interest shaping near-term market sentiment.

India–U.S. Deal: What We Know, What We Don’t

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The announcement by U.S. President Donald Trump and Prime Minister Narendra Modi that Washington will cut its “reciprocal” tariffs on Indian goods from 25% to 18% has brought immediate relief to Indian exporters and signalled a thaw after nearly a year of strained ties. The rollback also includes the removal of a punitive 25% penalty tariff imposed last August, which had pushed total U.S. tariffs on Indian exports to 50%, among the highest in the world, on par with Brazil.

Yet, beyond the headline tariff cut, the statements from Washington and New Delhi diverge sharply. While Mr. Trump has framed the move as part of a sweeping trade deal involving oil, investments and zero tariffs, Mr. Modi has confined himself to welcoming the tariff relief alone. This gap leaves several fundamental questions unanswered.

Is There Actually a US-India Trade Deal?

Mr. Trump’s repeated references to a “Trade Deal” have created ambiguity over whether the two sides have concluded a comprehensive agreement or merely agreed on a tariff rollback. One possibility is that he is referring to the long-discussed “first tranche” of an India–U.S. Free Trade Agreement (FTA), negotiations for which gathered pace after Mr. Modi’s visit to Washington in February 2025.

If so, the absence of detail is striking. Unlike the EU–India FTA concluded last week, where the negotiated text and scope were clearly outlined, neither Washington nor New Delhi has released any documentation, timelines or sectoral commitments for an India–U.S. FTA. Tariffs, non-tariff barriers, market access and investment rules were all meant to be part of this package, yet none of these elements has been formally disclosed.

Compounding the uncertainty is Mr. Trump’s claim that India has agreed to reduce “Tariffs and Non-Tariff Barriers against the United States, to ZERO”. New Delhi has not confirmed this, nor clarified which tariff lines would be reduced to zero. Sensitive sectors such as agriculture, particularly soyabean and dairy, which India has consistently opposed, remain conspicuously unaddressed.

The confusion is not new. In January, U.S. Commerce Secretary Howard Lutnick said a deal had been ready for months but stalled because, according to him, Mr. Modi did not make a phone call to clinch it, a claim the Ministry of External Affairs (MEA) firmly denied.

Does 18% Figure Indicate Level Playing Field for India?

The reduction to 18% is unquestionably an improvement from the earlier 25% rate imposed in April 2025. That earlier hike had left Indian exporters worse off than many regional competitors: Bangladesh and Vietnam faced tariffs of around 20%, Pakistan 19%, while China’s 34% rate was largely deferred until November 2026.

For labour-intensive sectors such as apparel, and for gems and jewellery exporters who were among the hardest hit, the new rate restores some competitiveness. However, Indian exporters are still not on equal footing. Many neighbouring and Asian economies continue to enjoy a Generalised System of Preferences (GSP) concession of about 5%, a benefit the U.S. withdrew from India in June 2019 during Mr. Trump’s first term.

As a result, Indian industry had hoped that any revised reciprocal tariff would land closer to 15%, not 18%. The current rate narrows the gap, but does not eliminate it.

What Is Actually Happening With Russian Oil?

Perhaps the most contentious claim from Washington is Mr. Trump’s assertion that Mr. Modi has “agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela”, a move he linked to ending the war in Ukraine. The MEA has so far declined to comment on this assertion.

This silence matters because it cuts against India’s long-stated position. When the U.S. imposed a 25% penalty tariff last August over India’s Russian oil purchases, the MEA called the move “unfair, unjustified and unreasonable”, stressing that energy imports are driven by “market factors” and the need to ensure energy security.

In practice, however, India’s Russian oil imports have already been declining. After peaking in 2024, refiners began scaling back purchases. In October, imports of Russian Ural crude fell about 38% year-on-year. By December, the trend had deepened.

According to the European Centre for Research on Energy and Clean Air (CREA), “India’s Russian crude imports recorded a sharp 29% month-on-month reduction to the lowest volumes since the implementation of the price cap policy.” On January 6, 2026, Reliance Industries said it would not receive any Russian oil in January and had not taken Russian crude for the previous three weeks.

The key question is whether these reductions reflect commercial recalibration, or a political commitment now being formalised under U.S. pressure.

India Under US Sanctions Pressure?

There is historical precedent for concern. In 2019, India “zeroed out” imports of Iranian and Venezuelan oil after U.S. sanctions threats, with then U.S. Ambassador Nikki Haley publicly pressing New Delhi. Following the U.S. operation against Venezuelan President Nicolás Maduro in January this year, Mr. Trump has suggested that Washington would now “allow” imports of Venezuelan oil, a position that offers India flexibility, but also underscores how contingent its energy choices appear on U.S. approval.

The pressure extends beyond oil. The U.S. has warned of 25% tariffs on countries doing business with Iran and has withdrawn the sanctions waiver for Indian investment in Iran’s Chabahar port. Government sources indicate India is prepared to give up its “minimal levels” of trade with Iran to avoid further tariffs.

Significantly, the Union Budget presented on February 1 makes no allocation for Chabahar in the coming year. After 23 years of strategic investment, this omission suggests New Delhi may be preparing to pause or retreat from the project until the sanctions environment eases.

What’s $500 Billion Commitment?

Mr. Trump’s claim that Mr. Modi committed to “BUY AMERICAN” at a much higher level, including purchases of over $500 billion in U.S. energy, technology, agricultural products, coal and more, is one of the boldest assertions yet the least substantiated.

The MEA has declined to confirm any such commitment. Context matters here. India–U.S. bilateral trade in goods currently stands at about $131 billion. India’s cumulative investment in the U.S. has hovered around $40 billion.

A $500 billion figure, therefore, can only be meaningful if spread over many years and across multiple sectors, much like similar claims Mr. Trump has made about the European Union, Japan and others following their trade deals. Without timelines, sectoral break-ups or binding mechanisms, the number functions more as a political headline than a verifiable obligation.

The tariff cut to 18% is real, immediate and economically significant. Beyond that, much remains unresolved. The gulf between Washington’s expansive claims and New Delhi’s carefully limited confirmations raises fundamental questions about the scope of the agreement, India’s energy autonomy, and the true balance of concessions.

Until the fine print is released, the India–U.S. deal remains less a finished treaty and more a framework shaped as much by geopolitics and pressure as by trade economics.