Indian equity benchmarks witnessed a remarkable surge on Tuesday, with Sensex jumping 2,072.67 points to settle at 83,739.13 and Nifty 50 surging 639.15 points to 25,727.55, representing one of the most powerful one-day rallies in recent memory. The benchmark indices rose nearly 5% within a single trading session, showcasing robust investor enthusiasm following the announcement of a significant trade agreement between India and the US. The rally came after US President Donald Trump announced a trade deal with India that slashes US tariffs on Indian goods to 18% from 25% in exchange for India halting Russian oil purchases and lowering trade barriers. According to Moneycontrol, the market recovery came following the United States' decision to reduce tariffs on Indian goods to 18 percent from 25 percent. However, market breadth remained negative with about 1,597 shares declining against 1,312 advancing on the NSE. The India-U.S. trade deal is a major boost for investor sentiment, acting as a positive trigger for foreign buying and supporting the rupee, said Jefferies analysts led by Mahesh Nandurkar. The 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 U.S., as noted by Citi Research.
Industrialists have strongly praised the India-US trade deal as a transformative achievement for India's global economic standing. Harsh Goenka, Chairman of RPG Enterprises, termed the agreement as the "Father of all deals" in a post on X, describing it as a great achievement that comes after the conclusion of the "Mother of all deals" with the European Union during President Antonio Costa and Ursula von der Leyen's state visit to India last month. Sanjiv Goenka, Founder and Chairman of RPSG Group, credited Prime Minister Modi's leadership for advancing India's economic interests on the global stage, noting that the deal was anchored by the PM's resolute leadership, persistence and India-first approach. Their remarks come after Trump's Truth Social post where he referred to his conversation with PM Modi, noting that the Prime Minister was one of his closest friends and a powerful, respected leader of India. The deal represents a significant milestone in India's trade diplomacy, with Trump stating that the US and India "have agreed to a trade deal" with Washington reducing the reciprocal tariff from 25% to 18% "out of friendship and respect" for PM Modi. As per The Economic Times, the deal removes one of the biggest overhangs on India's equity story at a time when the market has already outperformed MSCI Emerging Markets by 28 percentage points in 2025 and a further 14 percentage points in January 2026 in US dollar terms.
Brokerage firm Jefferies has made significant changes to its model portfolio following the India-US trade deal announcement. According to CNBC TV18, the firm has reduced IT exposure and increased allocation to metals, taking materials to an overweight stance after recent sector weakness. The strategy team has cut its underweight IT stance further by trimming Infosys, while increasing weight in metals via additions to Hindustan Zinc and JSW Steel. Hindustan Zinc is being used as a lever to play silver and zinc, with Jefferies citing strong cost advantages, spot silver trading about 50% above the December quarter average and an expected 41% jump in FY27 EBITDA. JSW Steel is expected to deliver strong sequential improvement as Indian steel prices rise following safeguard duties and China's moves to curb "involution", with Jefferies pencilling in a 34% quarter-on-quarter jump in March quarter EBITDA and 45% year-on-year growth in FY27. The brokerage has also replaced Godrej Consumer Products with Eternal in its model portfolio, citing Eternal's robust growth and margin expansion in quick commerce and food delivery segments, with the stock currently trading approximately 25% below its peak valuation. As per The Economic Times, Eternal is highlighted for its strong growth and margin improvement across quick commerce and food delivery verticals, with the stock trading about 25% below its peak improving the risk-reward profile at current levels.
All sectoral indices traded in the green on Tuesday, with Nifty Realty, Nifty Metals, Nifty Pharma, and Nifty Chemicals leading the rally. The India-US trade deal is a major boost for textile, seafood, gems and jewellery companies, which have a higher exposure to the US market. Among major textile companies, Gokaldas Exports, Trident, KPR Mill and Welspun Living will be in focus, while seafood exporters including Apex Frozen Foods and Avanti Feeds could also rise substantially. According to Jefferies analysis, Adani Group companies stand as one of the key beneficiaries of the recently announced US-India trade deal. This is largely due to the Adani Group companies' significant exposure to the US, as highlighted by the brokerage firm. The trade deal is expected to reshape market dynamics and serve as a major boost to several key sectors, including gems and jewellery, textiles and energy. Other sectors identified as key gainers include auto ancillaries, solar manufacturing, chemicals, and textiles. Specific stocks identified include Sona BLW and Bharat Forge in auto components, Waaree Energies, Premier Energies and Emmvee in solar, Navin Fluorine, PI Industries and SRF in chemicals, and Welspun Living in textiles. As per The Economic Times, Jefferies flags auto ancillaries, solar manufacturers, chemicals, textiles and Adani Group companies as key beneficiaries of lower US tariff barriers and changes in crude sourcing patterns.
The India-US trade deal dramatically cuts tariffs on Indian exports to the US from an average of 50% to approximately 18%, positioning Indian goods more favorably compared to regional competitors like Pakistan and Vietnam. Under the revised terms, these tariffs are capped at 18%, providing an advantage of 1-2 percentage points over key rivals, especially crucial for sectors such as textiles, leather goods, gems, and jewellery. Concurrently, tariffs on US goods imported into India have been reduced to zero, with most agricultural products excluded from this provision. The US remains India's largest export destination, representing $87 billion or 18% of total Indian exports. Electrical machinery and equipment, pharmaceuticals, precious stones, machinery, apparel, organic chemicals, mineral fuels, made-ups, vehicles and iron and steel dominate India's export basket to the US, with the top ten lines accounting for a large share of flows. The broader positive sentiment for exports, coupled with potential rupee strengthening, is seen as a catalyst for renewed foreign portfolio investor (FPI) engagement. According to The Economic Times, the US is India's largest goods export market with shipments of $87.4 billion dollars in 2024, accounting for about 18% of total exports. India's goods trade surplus with the US has nearly doubled over the past four years to $46 billion by 2024, underlining the strategic importance of the corridor for exporters and policy makers alike.
According to Jefferies analysis, FPI sentiment remains negative due to concerns around AI-led growth opportunities, weak rupee, and absence of trade deals. Foreign portfolio investors have pulled out $34 billion in the last 16 months, triggering a rare underperformance over Asian and emerging market peers. An analysis of 63 emerging market funds with assets under management of $330 billion shows that India's relative weight has slipped below benchmark levels, with nearly 60% of these funds currently underweight on India versus the benchmark. However, the brokerage believes the rupee outlook should improve meaningfully going ahead, potentially acting as a trigger for renewed FPI inflows along with recent free trade agreements signed with the EU, UK and other regions. The anticipated strengthening of the rupee, supported by these trade agreements, could trigger renewed FPI inflows and shift current negative sentiment. As per Reuters, the Indian rupee rebounded in the non-deliverable forward market following the trade agreement, with one-month dollar/rupee NDF levels pointing to an opening near 90.15–90.25, compared to the previous level of 91.5125. As per The Economic Times, Jefferies argues the deal removes one of the biggest overhangs on India's equity story at a time when the market has already outperformed MSCI Emerging Markets by 28 percentage points in 2025 and a further 14 percentage points in January 2026 in US dollar terms.
