Nifty 50 Jumps as U.S.–India Tariff Deal Sparks Broad Market Rally

India’s equity market opened sharply higher on Tuesday after New Delhi and Washington disclosed a tariff agreement that immediately reduced U.S. duties on Indian goods and prompted reciprocal moves from India. The benchmark Nifty 50 index climbed 5 percent at the opening bell, lifting sentiment across sectors before giving back a portion of the advance and settling about 4 percent higher in midday trading.

The sudden upswing followed comments made Monday evening in the United States by President Donald Trump, who announced that the United States would lower its “reciprocal” tariff rate on Indian products to 18 percent from 25 percent. During the same remarks, he said Prime Minister Narendra Modi had agreed to remove India’s tariff and non-tariff barriers on U.S. exports, effectively bringing those obstacles to zero.

The removal of duties addresses a range of measures imposed in recent years. Prior to the new accord, the combined U.S. tariff burden on Indian goods had reached approximately 50 percent on some categories, a tally that included a 25 percent surcharge connected to India’s earlier purchases of Russian oil. Market participants interpreted the new arrangement to mean that the overarching rate now falls to 18 percent, a level viewed as unexpectedly generous by analysts who had anticipated a more gradual reduction.

Prime Minister Modi confirmed the outlines of the deal in a message on the social-media platform X, noting that products labeled “Made in India” would now enter the United States facing an 18 percent duty. According to the prime minister, India pledged to halt purchases of Russian crude and redirect energy imports toward U.S. suppliers, a step the White House has long encouraged.

Expectations of a bilateral agreement had been circulating since early 2025, when India was thought likely to be among the first nations to formalize a new trade framework with the United States. The delay had weighed on local markets, creating what some strategists described as a disconnect between India’s generally strong macroeconomic indicators and the weaker performance of multiple asset classes.

The deal with Washington arrives only weeks after India concluded a separate trade pact with the European Union. Combined, the two arrangements could represent a considerable external boost for India’s economy in 2026, according to several investment houses. Trideep Bhattacharya, president of equities at Edelweiss Asset Management, said in a client note that the tariff outcome exceeded prevailing forecasts and, when paired with the EU agreement, constituted one of the most substantial growth catalysts on the horizon.

Market reaction and historical context

If the Nifty 50 closes with gains near current levels, the session would mark the index’s strongest single-day percentage advance in almost six years. The rally reversed a pattern of lackluster performance that had characterized Indian equities over the previous year. Foreign portfolio investors withdrew record sums from local shares during 2025, leaving the Nifty up just over 10 percent for that calendar year. In U.S. dollar terms, the MSCI India benchmark rose only 4.29 percent, sharply underperforming the broader MSCI Emerging Markets index, which advanced 33.57 percent.

The rupee, pressured by the absence of a U.S. trade accord and by persistent capital outflows, ranked as Asia’s weakest currency in 2025. News of the tariff reductions prompted an immediate rebound; the rupee appreciated roughly 1 percent and last traded near 90.29 per dollar. Currency dealers pointed to the prospect of improved export earnings and a moderation in imported energy costs as key drivers behind the move.

Analysts described the breakthrough as removing a central obstacle to confidence. Radhika Rao, senior economist and executive director at DBS Bank, said the agreement is “unequivocally positive” for exports, sentiment and domestic financial markets. She added that elevated tariff rates had been a main source of investor caution over the past quarter.

Details of the tariff framework

Under the revised U.S. schedule, the headline rate on Indian goods falls to 18 percent. In exchange, India has committed to eliminating its own duties and non-tariff barriers on incoming U.S. products. The two governments have yet to release a full product-by-product list, but officials indicated that the reductions will apply across a broad array of manufactured items as well as selected agricultural and technology categories.

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Energy trade occupies a prominent place in the arrangement. President Trump stated that India would discontinue the purchase of Russian oil and instead acquire “much more” crude and natural gas from U.S. suppliers. According to the Office of the United States Trade Representative, energy exports have been one of the fastest-growing components of bilateral commerce in recent years, and the accord is expected to accelerate that trend.

Implications for economic growth

Economists said lower tariffs could enhance India’s export competitiveness in textiles, pharmaceuticals, engineering goods and information-technology services, sectors that collectively account for a large share of foreign-exchange earnings. On the import side, U.S. producers of agricultural commodities, medical devices and aircraft components stand to benefit from easier access to India’s expanding consumer and industrial markets.

While the immediate market response has been enthusiastic, several commentators noted that the policy shift will take time to filter through to corporate earnings and broader economic indicators. Businesses must modify supply chains, reprice contracts and navigate customs procedures before they can capture the full advantage of the new rates. Nevertheless, the prospect of tariff clarity is already altering capital-allocation decisions, executives said.

The timing of Tuesday’s advance is significant because domestic benchmarks had been drifting near technical support levels after a series of global risk-off episodes. The tariff news not only provided a catalyst for equities but also led to a decline in government bond yields as investors priced in the possibility of stronger export revenues and improved fiscal receipts.

As trading progressed, profit-taking trimmed the index’s earlier 5 percent spike, yet turnover remained elevated. Sectoral data showed outsized interest in exporters such as information-technology services firms, automobile manufacturers with sizable North American sales, and specialty chemical producers. Banks with international exposure also gained ground on expectations of higher trade-finance volumes.

Market participants will watch closely for the publication of the formal agreement text, which is expected within weeks. Further details on implementation timelines, compliance mechanisms and potential exemptions could influence the durability of the current rally.

Crédito da imagem: Danish Siddiqui / Reuters