The announcement of a landmark India-US trade deal has ignited optimism across financial markets, with analysts predicting a robust rally when trading resumes on Tuesday. Early indicators point to a significant gap-up opening for benchmark indices like the BSE Sensex and Nifty50, following a substantial surge in GIFT Nifty.
Market Reaction and Immediate Impact
GIFT Nifty witnessed an impressive jump of nearly 800 points before settling slightly lower, signaling widespread relief among investors. This sharp upward movement reflects growing confidence that the trade agreement will alleviate long-standing uncertainties that have weighed on Indian equities.
Key Provisions of the Trade Deal
The newly announced pact slashes tariffs on Indian exports to the United States from 25% down to 18%, marking a substantial reduction that enhances competitiveness. Additionally, reports suggest that the 25% penal tariff imposed on Russian crude oil purchases may also be removed, further strengthening India's economic position.
US President Donald Trump confirmed that Washington would lower reciprocal tariffs on Indian goods, while New Delhi has committed to reducing both tariff and non-tariff barriers on American imports. This bilateral understanding represents a critical breakthrough after months of negotiations.
Expert Insights and Market Sentiment
Sonam Srivastava, founder and fund manager at Wright Research PMS, emphasized that the tariff reduction from 25% to 18% serves as a clear positive catalyst for Indian equities. "This development benefits both market sentiment and corporate earnings," she noted. "The strong rise in GIFT Nifty indicates an immediate reassessment of risk, driven by expectations of improved trade competitiveness, reduced cost pressures for exporters, and closer economic alignment between the two nations."
Srivastava highlighted that export-oriented sectors are likely to experience healthier order flows and more stable margins over the medium to long term. However, she cautioned that the sustainability of the market rally will ultimately depend on upward revisions to earnings estimates.
Broader Economic Implications
Garima Kapoor, deputy head of research and economist at Elara Capital, pointed out that the 18% tariff rate brings India closer to parity with other comparable economies facing similar levies. She added that if penalties related to Russian oil are indeed withdrawn, India could secure an even more advantageous tariff position globally.
According to Kapoor, the overall trajectory of the agreement remains constructive and supportive for Indian assets, even though some tariff barriers may persist. The deal effectively removes a significant overhang that had kept overseas funds on the sidelines and contributed to sustained weakness in Indian equities throughout January.
Context and Market Performance
Indian markets endured a challenging January, with the Nifty shedding over 1,000 points at one stage as foreign portfolio investors offloaded billions of dollars worth of stocks. Uncertainty surrounding trade policy, pressure on the rupee, and a persistent global risk-off mood had caused Indian equities to underperform other major markets.
Market participants have consistently argued that progress in India-US trade negotiations would serve as the key catalyst for a sentiment reversal. The current developments validate that perspective, offering renewed hope for a sustained recovery.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
