Indian Shares Jump as Trade Deal With U.S. Sparks Broad Rally, Nifty Near Record High

BY MIRABEL ODETA

Indian equities surged sharply on Tuesday, with benchmark indexes posting their biggest intra-day jump in five years as investors welcomed a long-awaited trade agreement between India and the United States that removed a major source of uncertainty for markets. Buying was broad-based, led by heavyweight Reliance Industries and export-oriented stocks, pushing the Nifty 50 to within striking distance of its all-time high.

Both key indexes opened with gains of about 5%, reflecting pent-up optimism after months of caution. By 9:41 a.m. IST, the Nifty 50 was up 2.81% at 25,799.5, just around 50 points shy of record levels, while the BSE Sensex advanced 2.83% to 83,977.92. The rally marked a sharp turnaround for Indian stocks, which have lagged several Asian and emerging market peers this year due to foreign investor selling and global trade concerns.

The surge followed an announcement by U.S. President Donald Trump late Monday outlining a trade deal with India that significantly lowers U.S. tariffs on Indian goods to 18% from 50%. In return, New Delhi agreed to halt purchases of Russian oil and reduce several trade barriers. Market participants viewed the agreement as a meaningful step toward improving export prospects and restoring confidence among overseas investors.

Gains were widespread across sectors, with all 16 major industry groups trading higher. Broader markets also joined the rally, as small-cap and mid-cap indexes jumped about 3% each, underscoring strong risk appetite. Of the 50 stocks in the Nifty index, 46 were in positive territory. Reliance Industries, the most influential stock on the benchmarks, climbed 4% to emerge as the top gainer on both the Nifty and the Sensex.

Export-focused sectors were among the biggest beneficiaries, with strong early advances seen in auto ancillaries, textiles, apparel, seafood, engineering goods and specialty chemicals. Investors expect the reduction in tariffs to improve order visibility and margins for companies in these segments, which had been under pressure amid trade uncertainty.

The positive sentiment also spilled over into currency markets. The Indian rupee strengthened more than 1% to 90.34 per U.S. dollar in early trade, supported by expectations that the deal will help attract foreign capital back into Indian assets after sustained outflows over the past year. A firmer currency is seen as another stabilizing factor for equity markets.

Market strategists said the agreement could mark a turning point for Indian equities in 2025. According to Uttam Kumar Srimal, deputy head of fundamental research at Axis Direct, the trade deal improves earnings visibility and supports a potential re-rating of valuations, particularly for export-oriented and capital expenditure-linked sectors. He added that it reinforces India’s appeal as a relatively safe destination within the emerging markets universe.

Foreign investor sentiment has been a key drag on Indian stocks this year. Overseas portfolio investors have sold about $23 billion worth of shares since the start of 2025, contributing to a rare period of underperformance versus regional peers. Analysts attributed the selling to multiple factors, including delays in finalizing the India–U.S. trade agreement, limited exposure to fast-growing global themes such as artificial intelligence, and muted corporate earnings growth.

The impact of tariffs had also weighed on the rupee, creating a negative feedback loop that encouraged further foreign outflows. Peeyush Mittal, a portfolio manager at Matthews Asia, said higher tariffs contributed to currency weakness, prompting global investors to pull capital out of India. He noted that the new trade deal helps break that cycle by fostering stability in the currency and giving foreign investors a clearer framework to reassess Indian equities.

With the policy overhang now lifted, investors will be watching closely to see whether foreign inflows resume and whether the rally can be sustained. For now, the sharp move higher reflects renewed confidence that improved trade ties with the U.S. could provide a stronger foundation for Indian markets in the months ahead.