India-US trade truce triggers a market surge
A landmark tariff agreement sparked a powerful rally on Dalal Street, lifting export-linked sectors and strengthening the rupee
Last Updated: Feb 03, 2026, 19:19 IST3 min
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Indian markets delivered one of their most powerful rallies in years on February 3, 2026, as investors cheered a breakthrough India–US trade agreement that dramatically altered the outlook for the country’s export economy. What began as cautious optimism before the opening bell turned into an all-out surge once trading commenced, with benchmark indices posting blockbuster gains across the board.
The day ended as strongly as it had begun. The BSE Sensex closed up 2,350 points at 84,912, while the Nifty 50 finished 707 points higher at 25,781, marking gains of nearly 3 percent each. Market breadth was overwhelmingly positive, with advancing stocks outnumbering losers by more than four to one. Mid-caps and small-caps outperformed the benchmarks, underlining the depth of the rally. Trading volumes were among the highest of the year as foreign institutional investors turned buyers after weeks of persistent selling.
The trigger was the announcement that New Delhi and Washington had agreed to reduce reciprocal tariffs to around 18 percent, rolling back the punitive duties that had weighed on Indian exporters for months. Significantly, the new framework clarified that India’s IT services exports and electronics exports—two of the country’s biggest global revenue generators—would remain largely outside the scope of the tariff regime, easing fears of disruption to those sectors as well. For Dalal Street, the deal removed a major overhang and revived hopes that global trade flows would once again tilt in India’s favour.
Few sectors captured that optimism better than textiles, which emerged as the star performer of the session. Export-oriented companies saw explosive moves as investors rushed to price in the benefits of easier access to the US market. Gokaldas Exports surged 20 percent, hitting its upper circuit, while KPR Mill jumped 17 percent. Vardhman Textiles rose 12 percent and Arvind Ltd gained nearly 10 percent, as traders anticipated a sharp recovery in order books and margins. Analysts said the tariff rollback could help Indian manufacturers claw back market share lost to regional competitors over the past year.
The pharmaceutical sector also rallied strongly. The Nifty Pharma index advanced 3 percent, led by frontline names with significant US exposure. Sun Pharmaceutical Industries climbed 3.7 percent, Dr Reddy’s Laboratories gained 3.2 percent, and Lupin rose 4 percent as the market bet that smoother trade relations would improve pricing stability and speed up new product approvals. For an industry that relies heavily on the American market, the deal was seen as a meaningful long-term positive.
The auto and auto-ancillary space joined the celebration as well. The Nifty Auto index rose 3.7 percent, reflecting expectations of stronger export demand for components and vehicles. Bharat Forge surged 8 percent, Balkrishna Industries jumped 7.3 percent, and Samvardhana Motherson gained 6.8 percent. Even large domestic-focused names participated, with Maruti Suzuki advancing 2.7 percent. Industry leaders were quick to underline the opportunity. “We see this as a strong foundation for the next phase of our global expansion,” said Baba Kalyani, chairman and managing director, Bharat Forge, capturing the optimism that swept through the manufacturing ecosystem. The message from investors was clear: Reduced tariffs could revive a crucial growth engine for Indian industry.
The optimism spilled over into financials and heavyweights. Private banks, NBFCs and capital goods stocks all logged smart gains as risk appetite returned. Technology stocks, while not direct beneficiaries of tariff cuts, moved higher on the broader improvement in sentiment, reassured that their core export markets remained unaffected.
Currency markets mirrored the upbeat mood. The Indian rupee strengthened sharply to close at 90.42 against the US dollar, its best single-day performance in months. The move was particularly striking because the rupee had been among Asia’s worst-performing currencies in recent quarters, steadily weakening amid trade uncertainty and foreign fund outflows before staging today’s sharp outperformance.
While Indian equities were on a tear, the picture elsewhere was more mixed. Most Asian markets ended modestly higher on hopes that the India–US deal could signal a softening of global trade tensions, with Japan’s Nikkei and South Korea’s Kospi gaining around 1 percent each. European markets opened firm but pared gains later in the day as investors awaited fresh economic data from the US. Wall Street futures pointed to a steady start, though traders remained cautious ahead of upcoming Federal Reserve commentary.
Despite the euphoria the real benefits of the agreement will depend on implementation and on how quickly Indian exporters can ramp up capacity to meet renewed demand. Yet the verdict on February 3 was unambiguous: A major cloud over Indian markets had lifted.
First Published: Feb 03, 2026, 19:19
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