FIIs Infuse ₹5,236 Crore as India-US Trade Deal Boosts Markets

Indian equity markets snapped a long streak of volatility on February 3, 2026, as foreign institutional investors (FIIs) returned to the buying side with significant conviction. This shift in sentiment followed the announcement of a landmark trade agreement between India and the United States. The deal has effectively removed a major overhang that had weighed on domestic assets for several months. According to provisional data from the National Stock Exchange (NSE), FIIs purchased shares worth ₹5,236 crore, marking their highest single-day inflow since late October 2025.

Domestic institutional investors (DIIs) also supported the rally, recording net purchases of approximately ₹1,014 crore. The combined buying activity propelled the benchmark indices to their best single-day performance in months. The Nifty 50 index surged by 2.55 percent to close at 25,727.55, while the BSE Sensex jumped 2.54 percent to end at 83,739.13. This broad-based rally was visible across almost all sectors, reflecting a renewed confidence in the Indian growth story.

The Impact of the India-US Trade Agreement

The primary catalyst for this market surge was the breakthrough in trade negotiations between New Delhi and Washington. Under the new agreement, the US has agreed to reduce reciprocal tariffs on Indian imports from 25 percent to 18 percent. More importantly, the US has fully withdrawn an additional 25 percent punitive levy that was previously linked to India's trade in Russian oil. This represents a total reduction of 32 percent in the tariff burden for Indian exporters, significantly enhancing their competitiveness in the American market.

In exchange, India has agreed to increase its purchases of US petroleum, defense equipment, and aircraft. There are also provisions for India to selectively open parts of its agricultural sector to US exports. The deal was finalized following a high-level discussion between Prime Minister Narendra Modi and US President Donald Trump. Investors view this as a major step toward restoring trade stability and preventing the risk of India being isolated in global trade flows.

Currency and Bond Market Reactions

The positive sentiment was not restricted to equities alone. The Indian rupee witnessed its strongest rally in over seven years, strengthening by more than 1 percent to reach approximately 90.26 against the US dollar. This recovery is significant as the rupee had been under pressure due to sustained FII outflows and a strong dollar environment throughout the latter half of 2025.

Bond markets also reacted favorably to the news. The yield on the 10-year benchmark government bond fell by 5 basis points to 6.72 percent. A decline in bond yields typically indicates improved risk sentiment and lower borrowing costs for the government and corporations. The cooling of yields suggests that the market is pricing in a more stable macroeconomic environment following the trade resolution.

Sectoral Performance and Market Breadth

The rally on February 3 was notably broad-based, with the realty sector leading the gains. The NSE Realty index rose by nearly 4.8 percent as investors anticipated better capital flows and improved economic activity. Other sectors such as infrastructure, energy, pharma, and banking also saw robust buying interest. While defensive sectors like FMCG lagged slightly, they still managed to close in the green.

IT stocks, which are highly sensitive to US trade policies, posted moderate gains. Analysts suggest that the reduction in tariffs and the general improvement in bilateral relations will provide a more predictable environment for Indian service exporters. The overall market breadth was healthy, indicating that the recovery was not just limited to heavyweights but extended to mid-cap and small-cap segments as well.

Comparative Institutional Activity

To understand the scale of today's FII activity, it is helpful to look at recent historical data. The inflow of ₹5,236 crore is the highest since October 28, 2025, when FIIs bought nearly ₹10,000 crore during a major IPO subscription period. For the year 2026 so far, FIIs had been net sellers of shares worth over ₹37,000 crore before this turnaround. In contrast, DIIs have remained consistent pillars of support, with net purchases exceeding ₹71,000 crore in the same period.

Geopolitical Reset and Global Standing

Analysts are describing this trade deal as a "geopolitical reset." For months, the US-India trade rift had kept global investors cautious about increasing their exposure to Indian assets. This breakthrough comes less than a week after India signed a similar trade pact with the European Union, which aims to reduce tariffs on 97 percent of traded goods. Together, these two deals significantly improve India's access to the world's largest consumer markets.

By addressing the tail risk of geopolitical isolation, India has positioned itself as a stable partner in the global supply chain. This is particularly relevant at a time when global trade routes are being reorganized. The resolution of the tariff dispute allows investors to focus back on India's domestic fundamentals, such as corporate earnings and GDP growth, rather than external policy shocks.

Market Outlook and Future Triggers

Looking ahead, market experts believe that the momentum could continue in the near term. The removal of the trade overhang coincides with the ongoing Q3 earnings season and the upcoming Union Budget announcements. If corporate earnings show a recovery and the budget provides further growth catalysts, the reversal of FII outflows could become a more permanent trend.

However, some caution remains. While the trade deal is a massive positive, global factors such as US interest rate trajectories and commodity price movements will continue to influence FII behavior. Investors will be closely watching the detailed text of the trade agreement as it is released to understand the specific implications for various industries, particularly agriculture and defense.

Summary of Market Indices

Conclusion

The events of February 3, 2026, mark a significant relief rally for the Indian stock market. The return of FIIs as aggressive buyers suggests that the valuation concerns and geopolitical fears that dominated 2025 are beginning to recede. With the India-US trade deal providing a clear roadmap for bilateral cooperation, the focus now shifts to domestic execution and the upcoming fiscal policy announcements. The market appears to have found a new floor, supported by both domestic liquidity and renewed foreign interest.