Nifty Crosses 25,150 as India-EU Trade Deal Fuels Market Rebound

Introduction

Indian equity markets staged a remarkable recovery on Tuesday, January 27, 2026, after a sharp sell-off in the previous session. The benchmark Sensex and Nifty 50 indices erased early losses to close firmly in positive territory. The rebound was primarily fueled by strong investor optimism surrounding the anticipated announcement of a landmark Free Trade Agreement (FTA) between India and the European Union. Supportive global cues, a strengthening rupee, and softer crude oil prices also contributed to the positive sentiment.

A Volatile Start and a Strong Recovery

The market opened on a weak note, continuing the negative trend from last Friday. The BSE Sensex fell as much as 449 points to an intraday low of 81,088.59, while the NSE Nifty 50 dipped 116 points to 24,932.55. However, buying interest emerged swiftly as reports solidified about the conclusion of the India-EU trade negotiations. The benchmarks staged a sharp V-shaped recovery, with the Sensex climbing over 700 points from its day's low to close above 81,850. The Nifty 50 comfortably crossed the 25,150 mark, settling around 25,175.

India-EU Trade Deal: The Primary Catalyst

The key driver behind the market's turnaround was the imminent finalization of the India-EU FTA, a deal described by market experts as the "mother of all deals." After years of negotiations, the agreement is expected to be officially announced, creating significant long-term opportunities for the Indian economy. Investors anticipate that the pact will boost exports, improve market access for Indian companies in Europe, and attract substantial foreign investment and technology. According to market expert Ajay Bagga, sectors like textiles, gems and jewellery, leather, and auto ancillaries are poised to benefit significantly. However, Dr. VK Vijayakumar of Geojit Investments noted that while the announcement is a positive sentiment driver, the fundamental impact will be visible only from 2027 onwards when the FTA becomes operational.

Key Market Data - January 27, 2026

Supporting Factors Bolstering Sentiment

Several other macroeconomic factors provided tailwinds for the market's recovery:

• Rupee Appreciation: The Indian rupee recovered from its historic low of 92 per dollar, gaining 10 paise to trade at 91.80 against the US dollar. The pullback in the dollar index from its recent highs provided relief to the domestic currency.
• Positive Global Cues: Asian markets, including Japan's Nikkei 225, South Korea's Kospi, and Hong Kong's Hang Seng, were trading higher. US markets also closed on a positive note overnight, providing a firm backdrop for Indian equities.
• Easing Crude Oil Prices: A decline in global crude oil prices also supported the market. Brent crude, the international benchmark, slipped to USD 65.12 per barrel. Lower oil prices are beneficial for India as they help ease inflationary pressures and reduce the country's import bill.
• Hopes of US Tariff Reduction: Comments from US Treasury Secretary Scott Bessent suggesting a possible rollback of the additional 25% tariffs on India also lifted investor spirits. This was linked to a sharp decline in India's purchases of Russian oil.

Sectoral Movers and Shakers

The rally was broad-based but with clear sectoral winners and losers. The Nifty Bank index gained 1.25%, and the PSU Bank index soared 1.76%. Stocks like Axis Bank were among the top Sensex gainers, climbing over 4% after reporting a 4% rise in its Q3 net profit. Adani Ports, Tata Steel, and Tech Mahindra also saw significant buying interest. In contrast, the auto sector faced selling pressure. Shares of Mahindra & Mahindra, Tata Motors, and Maruti Suzuki fell on concerns that the India-EU FTA would lead to lower import tariffs on European cars, increasing competition for domestic manufacturers. Kotak Mahindra Bank also dropped over 4% as its third-quarter earnings failed to impress investors.

Institutional Flows and Technical Outlook

Data from the previous trading session on Friday showed that Foreign Institutional Investors (FIIs) were net sellers, offloading equities worth Rs 4,113.38 crore. However, Domestic Institutional Investors (DIIs) provided support, making net purchases of Rs 4,102.56 crore. From a technical perspective, analysts noted that the Nifty 50 found support near the crucial 25,000 level. According to Aakash Shah of Choice Broking, the 25,200–25,300 zone acts as an immediate resistance. A sustained move above this level is necessary for the rally to continue, while 25,000 remains a key psychological support.

Conclusion: Cautious Optimism Prevails

The market's strong rebound on Tuesday reflects renewed investor confidence driven by the landmark India-EU trade agreement. While the long-term economic benefits are significant, the market's near-term trajectory will depend on the fine print of the deal, trends in foreign fund flows, and global macroeconomic cues, including the upcoming US Federal Reserve policy meeting. For now, cautious optimism prevails as investors await the official confirmation of a deal that could reshape India's trade and investment landscape.