India-US Trade Deal: Sensex and Nifty Surge as Tariffs Slash to 18%

Indian equity markets staged a historic opening rally on Tuesday, February 3, 2026, following the announcement of a landmark trade agreement between India and the United States. The deal, which was finalized late Monday night, has effectively dismantled a significant tariff wall that had weighed on investor sentiment for several months. Benchmark indices witnessed record gains at the opening bell, reflecting a decisive shift in global risk appetite and investor optimism across multiple sectors.

Historic Opening on Dalal Street

The Nifty 50 index opened at 26,308.05, marking a jump of 1,219.65 points or 4.86 percent. Simultaneously, the BSE Sensex surged by 3,656.74 points or 4.48 percent to open at 85,323.20. This explosive move added approximately ₹20 lakh crore to the total market capitalization of BSE-listed companies within the first few minutes of trade. The rally was characterized by intense short-covering and fresh buying interest from both domestic and foreign institutional investors, who viewed the trade deal as a structural positive for the Indian economy.

Understanding the Tariff Reset

At the core of this market frenzy is the decision by the United States to slash reciprocal tariffs on Indian goods. Previously, Indian exporters faced punitive tariffs as high as 50 percent, which had been imposed in August 2025. Under the new agreement, these tariffs have been reduced to 18 percent. This adjustment gives India the lowest US tariff rate among all emerging markets, significantly improving the price competitiveness of Indian exports against regional rivals like Vietnam and Bangladesh. In exchange, India has agreed to lower trade barriers for US goods and adjust its energy procurement strategies.

Textiles and Apparel Lead the Charge

The textile sector emerged as the primary beneficiary of the tariff reduction. Shares of major exporters such as Gokaldas Exports, KPR Mill, Welspun Living, and Indo Count Industries surged by as much as 20 percent, with several hitting their upper circuit limits. The reduction from 50 percent to 18 percent is expected to restore margins and revive order books that had been under pressure. Analysts suggest that the US market, being the largest consumer market for Indian apparel, will now be more accessible, providing a significant boost to labor-intensive manufacturing.

Seafood Exporters See Renewed Demand

Seafood and shrimp exporters also witnessed a sharp uptick in buying interest. Companies like Avanti Feeds, Apex Frozen Foods, and Coastal Corporation saw their stock prices rise significantly. The US is a critical destination for Indian frozen shrimp, and the lowering of trade barriers is expected to improve earnings visibility for the upcoming fiscal year. Market participants noted that the clarity provided by this deal removes a major overhang that had plagued the seafood industry for the last six months.

Geopolitical Implications and Energy Shifts

The trade deal includes strategic shifts in India's energy policy. As part of the agreement, India has committed to halting purchases of Russian oil, shifting its energy dependence toward US and Venezuelan sources. This move is seen as a major diplomatic win that aligns India more closely with US trade interests. US President Donald Trump announced the deal on social media, highlighting that India would also aim to purchase approximately $100 billion worth of US goods over a specified period, further strengthening bilateral economic ties.

Expert Perspectives on Economic Growth

Market experts have labeled the deal a game-changer. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the impact would be manifold, potentially lifting India's GDP growth rate to 7.5 percent in FY27. He emphasized that the combination of the India-US deal, the existing EU-India trade agreement, and a growth-oriented Union Budget would revive animal spirits in the economy. Corporate earnings growth is now projected to accelerate to the 16-18 percent range, supported by higher export volumes and a strengthening rupee.

Sectoral Performance Summary

Global Market Reaction and Asian Cues

The positive sentiment was not restricted to India. Asian markets traded sharply higher following the announcement. Japan's Nikkei 225 surged over 3 percent, while South Korea's KOSPI jumped 4 percent. In the US, technology and AI-related stocks had already ended higher overnight, with Apple and Alphabet posting significant gains. The global manufacturing PMI data also showed expansion, adding to the optimism regarding global economic growth and trade stability.

Impact on Currency and Commodities

The Indian rupee strengthened meaningfully against the US dollar, rallying more than 1 percent as capital flows returned to domestic assets. In the commodities market, gold and silver prices rebounded after recent falls. Gold prices on the MCX rose by approximately 2 percent, while silver jumped by 6 percent. This broad-based rally across asset classes indicates a reset in market positioning as investors move away from defensive stances toward growth-oriented sectors.

Future Outlook for Indian Equities

While the immediate reaction has been explosive, the long-term sustainability of the rally will depend on the execution of the trade pact and the subsequent impact on corporate balance sheets. However, the removal of the tariff overhang provides a much-needed boost to investor confidence. With FIIs showing signs of returning to Indian large-caps and blue-chip stocks in the banking and IT sectors, Dalal Street appears poised for a period of sustained growth. The focus will now shift to quarterly earnings and the implementation timelines of the tariff cuts.

Conclusion

The India-US trade deal has provided the Indian markets with a powerful catalyst, driving indices to near-record highs. By slashing tariffs to 18 percent, the agreement has not only benefited exporters but also improved the overall macroeconomic outlook for the country. As trade relations with the US enter a more predictable phase, India is well-positioned to strengthen its role in global supply chains and attract significant foreign capital in the coming years.