Indian shares surged on Tuesday following the US-India trade deal that slashes tariffs on Indian exports to 18% from 50%. Gift Nifty futures indicated a gap-up open of up to 4.5% for the Nifty 50.
Indian shares US trade deal sparked a strong rally in equity markets on Tuesday. Gift Nifty futures pointed to a sharp gap-up opening, with projections of around 4.5% higher for the Nifty 50 after it closed at 25,088.4 on Monday. The development followed US President Donald Trump’s announcement on 2 February 2026 of a trade agreement with India. The pact reduces US tariffs on Indian goods to 18% from 50% in exchange for India halting purchases of Russian oil and lowering trade barriers.
The deal provides significant relief to Indian markets. It removes a major overhang that had contributed to underperformance against Asian and emerging market peers. Foreign investors sold heavily earlier in the year amid trade tensions. The agreement boosts confidence in export sectors and supports the rupee.
Sensex Gap Up US Trade Deal Drives Market Optimism
The Sensex gap up US trade deal reflected immediate positive sentiment. Gift Nifty traded significantly higher overnight, signalling a potential open near record levels. The Nifty approached its January high of 26,373.20. Analysts viewed the pact as a catalyst for renewed foreign inflows and short covering.
US President Donald Trump announced the deal via social media after a call with Indian Prime Minister Narendra Modi. He stated the US would lower reciprocal tariffs to 18% from 25%, effective immediately, as a gesture of friendship. Trump noted India would stop buying Russian oil and increase purchases of US products, including energy, technology, and agriculture, potentially exceeding USD 500 billion.
Prime Minister Narendra Modi welcomed the announcement. He expressed delight that Made in India products would face a reduced tariff of 18%. Modi thanked Trump on behalf of India’s 1.4 billion people.
US-listed shares of Indian companies reacted positively overnight. Infosys rose 4.3%, Wipro jumped 6.8%, and HDFC Bank gained 4.4%. The iShares MSCI India ETF climbed 3%.
Nifty US Tariff Cut Benefits Export Sectors
The Nifty US tariff cut is set to aid export-oriented industries. Textiles, gems and jewellery, fisheries, chemicals, and IT services stand to gain from lower duties. Firms like Gokaldas Exports, Trident, Apex Frozen Foods, and Avanti Feeds could see gains.
Brokerages highlighted the deal’s positive impact. It eliminates policy uncertainty and improves visibility for export-linked earnings. Citi Research noted it removes risks of geopolitical isolation, following India’s recent EU deal. Jefferies described it as a major sentiment booster, likely spurring foreign buying and rupee support.
The Indian stock market trade deal reverses recent pressures. The Nifty gained only 6.1% in early 2025 amid trade concerns and foreign outflows of USD 23 billion. The agreement could stem such sales and revive inflows.
Indian Stock Market Trade Deal and Broader Implications
The Indian stock market trade deal enhances economic ties between the two nations. It aims to boost bilateral trade significantly. Reduced tariffs could add billions to Indian exports annually.
In South Asia, the shift affects energy markets. India’s halt on Russian oil may increase reliance on US or other sources, influencing regional supply dynamics for neighbours like Pakistan and Bangladesh. The pact promotes stability by addressing geopolitical frictions.
Market participants expect implementation to sustain momentum. Sectors with US exposure remain in focus. The rupee could strengthen further on improved sentiment.
Background
Trade tensions escalated in 2025 when the US imposed reciprocal tariffs of 25% plus an additional 25% punitive duty linked to India’s Russian oil imports. Negotiations advanced through 2025, with a joint statement outlining ambitions for USD 500 billion in bilateral trade by 2030. The 2 February 2026 announcement resolves the first major tranche, focusing on tariffs and energy commitments.
The deal follows India’s recent agreement with the EU. It underscores a strategic pivot amid global uncertainties.
What’s Next
Implementation begins immediately on tariffs, per Trump’s statement. India must phase out Russian oil purchases over coming months.
Markets will monitor foreign inflows and rupee movement. Sustained gains depend on execution and broader global cues. The Indian shares US trade deal positions equities for potential record territory if momentum holds.
Published in SouthAsianDesk, February 3rd, 2026
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