India-US Trade Deal Live: Nifty, Sensex, Rupee Set To Rise; Industry, Political Leaders Welcome Breakthrough

Indian equity markets are expected to react quite positively as the deal completely eliminates key policy uncertainties. 

Citi notes that the positive sentiment could trigger immediate foreign capital inflows, potentially turning India's Balance of Payments (BoP) position. The impact doesn't stop there. The trade deal may also go a long way in stabilising the rupee and easing pressure on domestic interest rates.

As noted by BofA, the effective tariffs will drop from approximately 35% to just 12-13%, thus providing a lifeline for labour-intensive sectors such as textiles, gems and jewellery and engineering goods, all of which have recently faced growth headwinds. 

Welcome move for global trade! Congratulations! After today evening’s talks between the US President Mr @realDonaldTrump and the Indian Prime Minister Shri @narendramodi , tariffs on Indian goods coming down sharply from 50% to 18% with immediate effect. A big win for…

— Ashish Chauhan (@ashishchauhan) February 2, 2026

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India-US trade deal: The rupee is set to rally sharply today and reduction on tariffs on Indian goods. Analysts at OCBC and Finrex Treasury Advisors see the currency rising about 1% on Tuesday, while Barclays predicts a “knee-jerk rally” of 1-2% after the trade deal, according to Bloomberg.

USD/INR fell 0.5% to 91.5163 on Monday.

Implied opening from forwards suggest spot may start trading around 90.14. The currency extended its gains in offshore markets after the US decision, with USD/INR 1-month non-deliverable forwards falling as much as 0.5%, extending a 1.3% overnight decline.

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BofA on Trade Deal

• India to increase its imports from US in turn by $500 billion
• Effective tariffs may drop from ~35% to ~12-13%
• Could provide India with significant relief and a competitive rate across the region, with the Russian oil penalties being removed as well.
• India will be agreeing to stop purchasing Russian crude oil, purchase more crude oil from US and Venezuela.
• Provide significant relief to India’s export sector, especially labor intensive areas such as gems & jewelry, textiles, agricultural products and engineering goods.
• See growth upside risks to India’s FY27 GDP projections of 6.8%.
• Already see reasonable growth in high frequency indicators.
• Expect GDP growth to benefit further from this trade breakthrough.
• Believe RBI is now done cutting rates but will continue to manage its liquidity provisions carefully.

Citi on Trade Deal

• Key tail risk of India’s geopolitical isolation about which investors were concerned has now been adequately addressed by the back-to-back deals with EU and US.
• Near-term growth risk from decline in labor intensive exports will now be substantially reduced as India’s tariff rates will be in line or lower than the peers in the region.
• Critical FDI (and to some extent FPI) theme of China 1 manufacturing in India might again become a dominant thesis.
• Trade deal is likely to eliminate a critical uncertainty and make policies (data center, GCC, nuclear power, mobile phone, aircraft and semicon) more effective on the ground.
• Positive sentiment effect which can bring in foreign inflows immediately could make the BoP turn positive.
• This will ameliorate the short-term pressures on the currency and rates.
• It eliminates any risk of protectionist measures to be applied on India’s large service exports to US and the people movement.
• The rub on effect of this trade deal in boosting the equity markets could provide an important catalyst to urban consumption through the wealth effect channel.
• There could be less apprehensions in the market about India’s possible tilt towards China now.

Indian equities appear poised to narrow their prolonged underperformance following a long-awaited trade agreement with the US, which has removed a major overhang on financial assets that had driven record foreign investor outflows.

Global investors have sold $3.2 billion worth of Indian equities so far this year, adding to a record $18.8 billion of outflows in 2024. After underperforming emerging-market peers by more than 30 percentage points, investor positioning weakened further in January, when India’s weight in the MSCI Emerging Markets Index slipped below South Korea’s for the first time since December 2021. This marks a sharp reversal from a period when India was challenging China for the top index position.

India’s valuation premium over the rest of Asia has also declined to its lowest level in nearly five years, as concerns over tariffs and a prolonged earnings slowdown weighed on market sentiment.

According to Jefferies Financial Group strategists, including Mahesh Nandurkar, the US trade agreement should help reverse negative foreign investor sentiment toward Indian assets. When combined with recent trade deals involving the EU, the UK, and other regions, the rupee could see a meaningful near-term boost, potentially acting as a catalyst for renewed foreign portfolio inflows.

Source: Bloomberg

INDIA-US DEAL: WORTH THE WAIT!

• India US trade deal has taken longer than expected but is on terms favourable. 
• The drop in tariffs from 50% to 18% effectively puts India on better terms than Vietnam, Bangladesh, China.
• Back to back deals with the EU and US prove 'slow and steady wins the race'.
• Deal terms not a big negative as India has been cutting down import of Russian crude for a while.
• While deal inks an 18%,some calculations set effective tariff as low as 12%.
• Obvious benefit to textiles, leather, gems and other export oriented sectors.
• Need to see: What concessions have been made on agricultural imports if any.
• Need to see: If deal eases transfer of technology in key areas.

US Chamber of Commerce President and CEO Suzanne P. Clark welcomed the India-US trade deal, saying the announcement will reduce tariffs and non-tariff barriers that will benefit American and Indian companies and workers in both great nations. 

"We are optimistic that this is the first step toward a comprehensive trade agreement that will unlock even more private sector collaboration, and we look forward to reviewing the details of the deal," she aid.

"A landmark moment for India-US relations as a historic trade deal has been finalised, bringing tariffs down to a significantly lower 18% and opening a new chapter of deeper and greater economic cooperation," said Defence Minister Rajnath Singh. 

"I congratulate Prime Minister @narendramodi and US President @realDonaldTrump on reaching this decisive agreement, which will significantly strengthen our strategic partnership and deliver tangible benefits to both the countries and their people. With this agreement, India–US economic ties are set to reach new heights," he added.

The India-US trade deal is a "good news for Made In India products" as they now face reduced tariff of 18%, said Finance Minister Nirmala Sitharaman on X. She noted that the

She thanked PM Modi and President Trump for their leadership. "People of our two large democracies stand to benefit."

Good news for #MadeInIndia products. They will now face reduced tariff of 18%.

Thanking the leadership of PM @narendramodi and @POTUS for this development.
People of our two large democracies stand to benefit. #IndiaUSRelations

— Nirmala Sitharaman (@nsitharaman) February 3, 2026

India has emerged with a clear tariff advantage over several competing export economies after New Delhi and Washington announced a trade deal on February 2, lowering tariffs on Indian goods to 18%. India now faces the lowest US tariffs among all emerging markets after South Korea. The move places India below or on par with most South and Southeast Asian peers, improving its relative cost competitiveness in key global markets. 

Prime Minister Narendra Modi welcomed the announcement, calling it a boost for domestic manufacturing. "Delighted that Made in India products will now have a reduced tariff of 18%," Modi said in a post on social media platform X, thanking US President Donald Trump for the decision.

Lower Than Most Regional Peers

At 18%, India's tariff rate is now lower than several major export-oriented economies in Asia. Bangladesh, Sri Lanka, Taiwan and Vietnam face tariffs of 20%, while Indonesia, Malaysia, Thailand, the Philippines and Pakistan are levied 19%. Cambodia also faces a higher tariff burden at 19%.

Among South Asian economies, India's positioning is particularly significant. While Afghanistan faces a lower tariff of 15%, its limited manufacturing depth and small export base mean it is not a meaningful competitor. Pakistan, India's closest rival in textiles and select manufacturing segments, faces a marginally higher 19% tariff, putting Indian exporters at a relative advantage.