Mumbai, February 3, 2026, 12:24 IST
- Sensex climbed over 3% by midday; Nifty surged roughly 3%, briefly touching a new peak at the open.
- The agreement slashes U.S. tariffs on Indian products from 50% down to 18%, linked to a commitment on oil buying.
- Monday’s bounce came after a selloff on budget day, triggered by a proposed increase in the securities transaction tax on derivatives.
Indian shares jumped Tuesday after Donald Trump unveiled a trade deal cutting U.S. tariffs on Indian goods to 18%, sparking a sharp gap-up opening. The Sensex surged 2,457 points—just over 3%—to 84,123 by midday. The Nifty 50 climbed 753 points to 25,842, briefly touching a record 26,341 at the open. Midcaps and smallcaps also rose more than 3%.
The rally is significant because tariffs had been slowly weighing on Indian assets. Washington’s duties, slapped on in late August, left Indian stocks and the rupee trailing most emerging-market peers last year. Investors have been eager for any hint that foreign capital might flow back. “A successful bilateral trade agreement should help enhance investor confidence,” said Marcella Chow, a global market strategist at J.P. Morgan Asset Management. Reuters
Trump tied the tariff cut to India stopping oil imports from Russia and easing trade barriers for U.S. exports. He also said India would start buying oil from the U.S. and possibly Venezuela. A White House official confirmed the U.S. would roll back a 25% punitive duty that had been added atop a 25% “reciprocal” tariff. Narendra Modi welcomed the new 18% rate in a post on X, though key details like timing and enforcement remain unclear. Reuters
The Nifty surged 2.81% to 25,799.5 in early trading, with small- and mid-cap indexes climbing around 3% as investors favored export-oriented stocks. Reliance Industries gained 4%. “For equity markets, the trade deal enhances earnings’ visibility,” Uttam Kumar Srimal of Axis Direct noted. Peeyush Mittal at Matthews Asia added the agreement “breaks this loop” that linked tariffs to rupee weakness and foreign outflows. Reuters
Tuesday’s surge came after Monday’s rebound, where the Nifty climbed 1.06% and the Sensex added 1.17%, recovering from a near 2% drop on budget day. Analysts, including Seshadri Sen from Emkay Global Financial Services, noted “limited downside risk” following the slide. Anand Gupta of Allianz Global Investors weighed in, saying the proposed securities transaction tax (STT)—a levy on trades—is unlikely to disrupt institutional hedging. Reuters
Power Grid Corporation of India surged nearly 8% on Monday, leading the winners. Adani Ports and SEZ, along with Bharat Electronics, also saw gains. On the downside, Axis Bank and Infosys slipped. According to exchange data, foreign institutional investors offloaded shares worth 588.34 crore rupees. Vinod Nair from Geojit Investments Limited noted that a sharp drop in global crude oil prices provided some relief, citing easing tensions between the U.S. and Iran.
A government official noted that India’s 18% tariff rate is still lower than some Asian counterparts, with Indonesia at 19% and Vietnam and Bangladesh at 20%. India has committed to purchasing U.S. petroleum, defence equipment, and aircraft, while opening limited access for certain agricultural products. A broader agreement is expected in the coming months. “Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into U.S. supply chains,” said S.C. Ralhan of the Federation of Indian Export Organisations. Moody’s Ratings added the tariff reduction should boost exports of goods. Reuters
Traders shouldn’t expect a smooth ride just yet. Charu Chanana, chief investment strategist at Saxo, cautioned that “there’s a lot we still don’t know,” pointing to a potentially sizable rise in the oil-import bill that could reignite inflation and currency concerns. Other investors stressed that the rally’s staying power hinges on the deal’s execution, not merely its announcement. Reuters
The weekend budget session continues to weigh on traders following the government’s plan to hike STT on derivatives like futures and options. India’s volatility gauge, the India VIX, dropped 8% on Monday but stayed jittery amid policy and trade updates after two volatile sessions.
