India-U.S. Trade Deal Sparks Historic Market Rally: Sensex and Nifty Surge 3%

Indian equity benchmarks witnessed a historic surge on Tuesday, February 3, 2026, as investors cheered the finalization of a long-awaited trade agreement between India and the United States. The BSE Sensex and Nifty 50 both jumped nearly 3 percent in intraday trade, marking one of the strongest single-day performances in recent years. The rally was primarily driven by the announcement that the U.S. would slash reciprocal tariffs on Indian goods to 18 percent, down from previous levels that reached as high as 50 percent for certain products.

At 12 PM, the BSE Sensex was trading at 84,122.44, up 2,455.9 points or 3.01 percent. Simultaneously, the Nifty 50 index stood at 25,849.30, higher by 748.10 points or 2.98 percent. The market breadth remained firmly positive, with 27 out of 30 Sensex stocks trading in the green, reflecting broad-based buying interest across large-cap and mid-cap segments.

The Core of the India-U.S. Trade Agreement

The trade deal, finalized late Monday night, involves a significant restructuring of trade relations between the two nations. U.S. President Donald Trump announced that the United States has reduced the reciprocal tariff on Indian goods to 18 percent. In exchange, India has agreed to halt its purchases of Russian oil and lower various trade and non-tariff barriers on American goods. This move is seen as a strategic pivot that aligns India more closely with U.S. energy and trade interests while providing Indian exporters with a competitive edge in the American market.

Department of Financial Services Secretary M. Nagaraju noted that the deal has removed a major overhang on the Indian economy. He stated that the sharp reduction in tariffs would allow Indian companies to plan their operations with greater certainty. The agreement is expected to support Indian exports worth approximately 4.38 lakh-crore, providing a substantial boost to the manufacturing and textile sectors.

Sectoral Performance and Export Winners

The textile sector emerged as the standout performer of the session, given its heavy reliance on U.S. exports. Shares of major textile players like KPR Mills, Gokaldas Exports, and Welspun Living surged between 11 percent and 20 percent. Analysts suggest that the duty reduction on apparel and textile products, which could be as high as 37 percent in some categories, will significantly improve margins and competitiveness for Indian firms against rivals like Vietnam and Bangladesh.

Chemical manufacturers also saw a massive rally, with Aarti Industries leading the pack with a 13.9 percent jump. India's chemical exports to the U.S. account for roughly 18 percent of its total chemical exports, and the new tariff structure is expected to provide a level playing field against competitors from China and the European Union. The following table summarizes the performance of key sectors during the intraday rally:

Impact on Manufacturing and Auto Ancillaries

Auto component makers and Electronics Manufacturing Services (EMS) firms also benefited from the trade optimism. Bharat Forge and Samvardhana Motherson saw gains exceeding 6 percent, as the reduction in U.S. import duties is expected to lower the cost of Indian-made parts for American automakers. In the EMS space, companies like Dixon Technologies and Syrma SGS rose as the deal improves the export competitiveness of Indian electronics.

Furthermore, the Adani Group stocks witnessed a sharp recovery ahead of their earnings announcements. Adani Enterprises surged over 11 percent, while Adani Ports gained more than 7 percent. This movement reflected a broader trend of investors rotating back into infrastructure and capital-intensive stocks as global risk sentiment improved.

Global Market Context and Commodity Rebound

The domestic rally was supported by positive cues from global markets. Asian indices, including Japan's Nikkei 225 and South Korea's Kospi, traded sharply higher following the trade deal announcement. In the U.S., manufacturing data showed expansion for the first time in a year, with the ISM Manufacturing PMI rising to 52.6 in January. This data, combined with the trade deal, fueled a global risk-on sentiment.

In the commodities market, gold and silver prices staged a strong rebound after recent sharp declines. Gold prices rose over 4 percent to touch intraday highs near 4,870 dollars per ounce, while silver jumped 9 percent. The Indian Rupee also showed strength, with the dollar falling to 91.51, reflecting increased confidence in India's balance of payments position following the trade agreement.

Comparative Tariff Advantage

A critical aspect of the new deal is the competitive advantage it provides India over other exporting nations. While India will now face an 18 percent duty, several other nations continue to face higher barriers. This positioning is expected to trigger immediate foreign capital inflows as India becomes a more attractive manufacturing hub.

Market Outlook and Analysis

Market experts believe that the trade deal completely eliminates key policy uncertainties that had plagued the Indian markets throughout 2025. Uttam Kumar Srimal of Axis Direct noted that the deal enhances earnings visibility and supports valuation re-rating for export-oriented sectors. The positive surprise is expected to force short-covering by Foreign Portfolio Investors (FPIs), who had been heavily short on the market.

As the session progressed, the focus remained on whether the Nifty could consolidate above the 25,800 mark. Analysts suggest that if the index holds these levels, the uptrend could extend toward the 26,200-26,400 range. The combination of the trade deal, stabilizing global cues, and the settling of post-Budget volatility has created a favorable environment for Indian equities in the near term.

Conclusion

The India-U.S. trade agreement marks a significant milestone in bilateral economic relations, effectively ending a period of tariff-related uncertainty. By securing an 18 percent tariff rate and aligning energy policies, India has positioned its export sectors for robust growth. While the immediate market reaction has been overwhelmingly positive, the long-term impact will depend on the execution of the deal and the ability of Indian manufacturers to scale production to meet increased American demand.