India's stock market rallies as investors cheer U.S. trade deal

[President Trump Welcomes Indian Prime Minister Modi To The White House]
Andrew Harnik/Getty Images News

India's stock market soared on Tuesday after President Donald Trump cut reciprocal tariffs on Indian goods to 18% from 25% as India agreed to stop buying Russian oil.

Trump said Indian Prime Minister Narendra Modi agreed to buy "much more" oil from the U.S. and, potentially, Venezuela.

He added that India will reduce tariffs and non-tariff barriers against the U.S. to "ZERO" and commit to "'BUY AMERICAN,' at a much higher level, in addition to over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products."

Indian shares rallied on Tuesday following the announcement, with benchmark indices Nifty 50 (NIFTY [https://seekingalpha.com/symbol/NIFTY]) and Sensex (SENSEX [https://seekingalpha.com/symbol/SENSEX]) up 2.8% each. The rupee (INR:USD [https://seekingalpha.com/symbol/INR:USD]) rose ~1% against the U.S. dollar.

Jefferies analysts said the trade deal is a major boost for investor sentiment in India, noting that the U.S. is the country's largest goods export destination.

"Combined with the recent large EU, UK and other free trade agreements signed, the view on the rupee could get a substantial boost in the near term," they added. To note, the rupee was Asia's worst-performing currency in 2025 due to U.S. trade uncertainty and persistent foreign investor outflows.

Jefferies expects India's auto ancillary, solar manufacturing, chemical and textile sectors to be the key beneficiaries of the trade deal.

India agreed to buy petroleum, defense goods, electronics, pharmaceutical and telecom products, and aircraft from the U.S., a government official told [https://www.reuters.com/world/india/indian-rupee-stocks-soar-after-trade-deal-with-us-2026-02-03/] _Reuters_.

Meanwhile, UBS' Paul Donovan said the trade deal "will have little effect on the U.S. affordability crisis—Indian imports are less than 3% of the U.S. total.

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