Indian equity markets staged a sharp rebound on Tuesday morning as investors reacted positively to news of a long-awaited trade agreement between India and the United States. The announcement triggered a broad-based rally across sectors, helping markets recover losses suffered after the recent Union Budget.
The benchmark BSE Sensex surged more than 3,600 points at opening to cross the 85,000 mark, while the Nifty50 jumped nearly 1,200 points, reflecting strong investor confidence. Both indices had ended Monday sharply lower following heightened volatility linked to budget-related concerns.
Sectoral indices recorded robust gains in early trade, led by realty, auto, consumer durables, and IT stocks, which rose between 3 and 4.5 percent. Although markets pared some of the early gains by mid-morning, sentiment remained firmly positive, with the Sensex still up over 2,200 points and the Nifty50 higher by around 650 points by 10 am.
The positive momentum extended to the currency market as well. The Indian rupee strengthened by 1.2 percent to 90.40 against the US dollar, supported by expectations of improved trade flows and reduced tariff pressures.
Market optimism followed US President Donald Trump’s announcement that the India-US trade deal had been finalised. Shortly after, Prime Minister Narendra Modi expressed appreciation for the development, calling it a significant step forward for bilateral economic cooperation.
While full details of the agreement are yet to be officially released, US Ambassador to India Sergio Gor indicated that US tariffs on Indian goods have been reduced to 18 percent, a sharp drop from the earlier 50 percent rate. The previous tariff structure included a 25 percent penalty linked to India’s purchase of Russian crude oil.
The revised tariff places India at a competitive advantage compared to several Asian export-oriented economies. Countries such as Bangladesh, Sri Lanka, Taiwan, and Vietnam face tariffs of around 20 percent, while Indonesia, Malaysia, Thailand, the Philippines, and Pakistan are subject to tariffs of approximately 19 percent.
The trade deal comes at a time of heightened volatility for Indian markets. Earlier this week, benchmark indices had suffered their worst budget-day fall in six years, with nearly ₹10 lakh crore in investor wealth wiped out amid concerns over proposed transaction tax hikes.
Market participants will now closely watch further disclosures on the India-US trade agreement, as well as policy clarity from the government, to assess the long-term impact on growth, exports, and investor sentiment.
