Stock market back with a bang, rupee gains on US trade deal

The stock market, which recorded another slump recently after a topsy-turvy 16 months, finally got a reason to cheer on Tuesday (February 3) as US President Donald Trump announced a trade agreement with India after months of speculation.

After Trump’s unilateral and arbitrary tariffs on India and other countries led to a steady exit of foreign investors, the Indian market’s sharp rise on Tuesday sparked hopes that they will soon return as the US tariff on Indian goods now stands at 18 per cent, down from 50 per cent imposed last year.

According to experts, the market could reach new highs in the coming days.

Sensex-Nifty make big jump

Stock market benchmark indices Sensex and Nifty ended 2.5 per cent higher on Tuesday.

After starting the trade on a buoyant note, the 30-share BSE Sensex further jumped 4,205.27 points or 5.14 per cent to hit the day's high of 85,871.73. It later ended at 83,739.13, up 2,072.67 points or 2.54 per cent.

Also read: India-US trade deal: Top 10 things we know so far from Modi-Trump statements

The 50-share NSE Nifty zoomed 639.15 points or 2.55 per cent to settle at 25,727.55. During the day, it surged 1,252.8 points or 4.99 per cent to 26,341.20.

Mid-cap and small-cap stocks also saw strong buying in Tuesday’s trade, with gains of 3 per cent. Thanks to this buying, the market cap of BSE-listed stocks increased by Rs 13 lakh crore to Rs 468.2 lakh crore in just a few minutes.

Tariff slash will strengthen rupee

Commenting on the sharp rise in the stock market, Vikram Kasat, Advisory Head at PL Capital, said, “With an 18 per cent tariff, India is now in a better position than many Asian countries. Many countries have tariffs of 19–20 per cent, while India’s is lower than that.”

He said this deal will reduce dependence on Russian oil—which it indeed will as Trump stated in the Truth Social post in which he announced the deal that India has pledged not to buy crude oil from Russia and to buy USD 500 billion worth of goods from the United States.

On Tuesday, the rupee strengthened against the dollar by 130 basis points and moved down from 91.52 to 90.22. According to Kasat, the rupee may remain strong, and pressure on interest rates may ease.

Also read: US-India trade deal | Trump's claim raises doubts over scope and timelines: GTRI

Sectors like textiles, gems and jewellery, and engineering will benefit the most, as these sectors were under pressure due to high taxes, he said, adding that with the uncertainty ending after the India-US deal, foreign investors may again invest in the Indian markets.

Textiles and jewellery stocks rise

Shares of the Adani Group were trading higher by more than 10 per cent after the India-US trade agreement. Shares in the textile and gems and jewellery sectors also saw significant gains. It is believed that these sectors could benefit significantly from the trade agreement.

Additionally, stocks of electronics and solar energy companies, including Waaree Energies and Premier Energies, were also trading with strong gains.

From the 30 Sensex firms, Adani Ports surged 9.12 per cent. The other prominent winners were Bajaj Finance, InterGlobe Aviation, Power Grid, Sun Pharma, Bajaj Finserv and Reliance Industries.

Tech Mahindra and Bharat Electronics were the only laggards.

Market gets direction after months of uncertainty

Vikas Gupta, CEO and Chief Investment Strategist of OmniScience Capital, said the trade deal will mark a positive sentiment for both domestic and foreign investors and also help bring the rupee down to below Rs 90 against the dollar.

Also read: India-EU FTA credit positive, to boost manufacturing and exports: Moody’s

He said the market was not being able to find direction amid the uncertainty, but with this deal, the downward trend will end now. According to data from NSDL, Foreign Portfolio Investors (FPIs) pulled out Rs 35,962 crore from Indian equities in January.

Finance Minister Nirmala Sitharaman’s Budget announcement to increase the Securities Transaction Tax (STT) on futures and options also led to a significant decline in the market. However, the stock market has seen a remarkable recovery in the past two days, and the trade deal has further strengthened sentiments.

(With additional inputs from agencies)