3 min readUpdated: Feb 3, 2026 10:23 AM IST
The stock market surged early in the trading session on Tuesday after US President Donald Trump announced a trade deal with India that would sharply cut tariffs on Indian imports to 18% from 50%. The BSE’s 30-stock flagship Sensex index, which opened the session 4.5% higher, was up 2344.94 points, or 2.9%, at 84011 points at around 9:20 AM. The Nifty 50, which is the National Stock Exchange’s top index, was at 26,308.05 points, up 708 points, or 2.8%.
The jump in the stock market comes after both indices crashed nearly 2% following a hike in the securities transaction tax for the futures and options segment, announced in the Union Budget FY27, which had spooked investors. The indices had already recovered over half of the losses on Monday and have now fully recovered from the post-Budget rout after today’s rise.
The long delay in the trade deal between the two countries had been a massive overhang for the Indian stock market over the past few months due to the rupee coming under pressure from the increasing costs of Indian exporters, for whom the US was among the biggest markets. The weak currency, coupled with other worries such as unsatisfactory earnings growth and rich valuations, has kept foreign investors (FIIs) away from Indian equities for quite some time.
FIIs have pulled out nearly $12 billion on a net basis from the stock markets since the beginning of August 2025, when the US had imposed an additional 25% tariff on India to take the effective tariff rate to 50%. During that time, the Sensex has gained just over 1% (before today’s rally), underperforming most other global markets. FIIs should, however, start coming back to the market now that the US and India have cut a deal that sees the tariff rate fall to a level that compares favourably with key export rivals like Vietnam, Malaysia, Cambodia, Thailand, Bangladesh, Indonesia (all 19-20%), and China (37%).
“India-US trade deal has gone through ups and downs like a roller coaster. While devil is in the details, it removes a hanging sword over rupee, equity, and rates market. Let us hope that it is a win-win deal for both countries as they have a lot to gain through cooperation,” said Nilesh Shah, managing director of Kotak Asset Management Company.
For VK Vijaykumar, chief investment strategist at Geojit Financial Services, the delay in the trade deal was the single biggest factor holding back the stock market. “The impact of the deal will be manifold: One, India’s growth rate will rise to around 7.5% in FY27 assisted by higher exports to the US. Two, corporate earnings already showing signs of revival in FY 27 can accelerate to around 16 to 18%. Three, the rupee will strengthen sharply,” said Vijaykumar. “The stock market, anticipating and discounting these developments, will boom,” he added.
Shares of textile companies, for many of whom the US is the biggest market, were among the biggest gainers early in the session, with some hitting their upper circuit after surging as much as 20%. Shares of shrimp exporters, who share a similar story, also hit upper circuits.
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