The Indian equity markets saw a significant surge of around 3% early on Tuesday, driven by widespread buying in various sectors, following the announcement of the India-US trade deal. Sensex rose by 2,421 points to reach 84,088, while Nifty gained 741 points to settle at 25,829. This trade agreement between India and the United States involves reducing reciprocal tariffs on Indian goods from 25% to 18% and eliminating the additional 25% duty on Russian crude oil purchases.
Main indices like Nifty Midcap 100 and Nifty Smallcap 100 recorded strong gains, with increases of 3.10% and 3.25% respectively. All sectoral indices showed significant growth, with realty, auto, consumer durables, and IT sectors being the major gainers, rising by 4.47%, 3.78%, 3.69%, and 3.04% respectively. India’s new tariff rate of 18% is now lower than that of several other major export-oriented Asian economies.
Market analysts noted that the US-India trade deal, which saw a reduction in tariffs from 50% to 18%, is a pivotal development for the Indian economy and stock markets. This long-awaited agreement is expected to boost India’s growth rate to around 7.5% in FY27, driven by increased exports to the US. Additionally, corporate earnings, already showing signs of recovery, could accelerate to 16-18% in FY27.
The positive sentiment surrounding the trade deal, along with the EU-India trade agreement and the growth-oriented Budget, is likely to enhance market sentiments. This could lead to immediate foreign capital inflows, potentially improving India’s Balance of Payments position. Market experts anticipate significant inflows into large-cap sectors such as banking, non-banking financials, telecom, capital goods, and IT, which are favored by Foreign Institutional Investors (FIIs).
In Asian markets, various indices saw gains, with China’s Shanghai and Shenzhen indices rising, Japan’s Nikkei surging, and South Korea’s Kospi recording significant growth. The US markets also closed positively in the last trading session, with Nasdaq, S&P 500, and Dow Jones all posting gains. On February 2, Foreign Institutional Investors (FIIs) were net sellers of equities worth Rs 1,832 crore, while Domestic Institutional Investors (DIIs) were net buyers of equities worth Rs 2,446 crore.
