India-US Trade Agreement Triggers Sharp Rupee Appreciation and Market Rally
The Indian currency experienced a significant upward movement against the US dollar on Tuesday, marking a notable reversal in its recent performance. This surge came directly after American President Donald Trump and Prime Minister Narendra Modi announced a bilateral trade agreement between India and the United States late Monday night.
Rupee Rebounds from Record Lows
In early trading sessions, the rupee appreciated by over 1% against the US dollar, climbing to levels around 90.40. This development represents a dramatic shift for the currency, which had been identified as the worst performing Asian currency throughout the previous year.
The persistent selloff from Foreign Institutional Investors (FIIs) had driven the rupee to hit a new record low of 92 versus the dollar just a few weeks prior to this recovery. President Trump confirmed that tariffs on Indian goods would be reduced to 18% with immediate effect, providing substantial relief to trade relations between the two economic powers.
Equity Markets Soar on Positive Sentiment
Meanwhile, Indian equity benchmarks demonstrated remarkable strength in Tuesday's trading session. Both the Nifty50 and BSE Sensex opened sharply higher, with both indices rallying over 2% during the day.
The Sensex rose by over 2,300 points while the Nifty50 soared by more than 700 points, reflecting widespread investor optimism following the trade agreement announcement.
Foreign Investor Activity Drives Momentum
Short covering by foreign institutional investors played a central role in Tuesday's strong market rally. The upswing was further reinforced by technical triggers as traders hurried to unwind bearish bets, with short positions estimated to be close to 90 percent.
During the trading session, the Nifty rebounded from oversold levels and moved back above the significant 26,000 mark, indicating a substantial shift in market sentiment.
Expert Analysis on Market Trajectory
Anand James, Chief Market Strategist at Geojit Investments, provided valuable insight into the market's potential direction. He noted that the index's firm close above 25,000 on Tuesday has opened the door for a move towards 25,800, with scope for a further rise to around 26,200.
James added an important caveat, however, stating that if the Nifty fails to hold above 25,800, it could slip into a consolidation phase within the 25,430 to 25,340 range, suggesting that sustained momentum would depend on continued positive developments.
Blue-Chip Stocks Lead the Charge
Large-cap stocks spearheaded the market rise, with prominent blue-chip names driving the benchmarks higher. Shares of Reliance Industries climbed nearly 4 percent, while Adani Ports surged about 8 percent, delivering a strong boost to the indices.
Other major stocks including HDFC Bank, L&T, Bajaj Finance, Eternal, ICICI Bank and Infosys also mirrored the upbeat mood, gaining as much as 5 percent during the trading session.
Budgetary Support Enhances Market Outlook
Additional support for the rally came from the Union Budget 2026's emphasis on capital expenditure, which lifted expectations of healthier order flows and clearer earnings prospects across multiple sectors. This combination of international trade developments and domestic policy initiatives created a powerful catalyst for market optimism.
The synchronized movement across currency and equity markets underscores the significant impact of international trade agreements on domestic financial indicators, particularly when involving major economic partners like the United States.
