NEW DELHI, Feb 3: Indian equity benchmarks rallied sharply on Tuesday after New Delhi and Washington announced a trade deal that will cut U.S. reciprocal tariffs on Indian goods to 18% from 25%, removing a major barrier for exporters and boosting investor confidence.

The 30-share BSE Sensex jumped nearly 4,205 points to 85,871.73 in early trade from Monday’s close of 81,666.46, while the NSE Nifty 50 climbed 1,253 points to an intraday high of 26,341.20 from 25,088.40, led by strong buying in export-oriented stocks. By 12:57 pm, the Sensex traded up 2,289.86 points, or 2.80%, at 83,956.32, and the Nifty 50 gained 698.90 points, or 2.79%, at 25,787.30. Bank Nifty also surged over 3,145 points to 61,764.85.

Midcap and smallcap indices rose nearly 3% each, while all sectoral indices traded positively, with realty, chemicals, consumer durables, and pharma leading gains.

Among Nifty 50 constituents, Adani Enterprises, Adani Ports, Jio Financial Services, Bajaj Finance, IndiGo, and Sun Pharma led the rally with gains of 5–12%. At the same time, Nestle India, Coal India, and ONGC traded lower. Market breadth was positive, with 2,696 of 3,186 NSE-traded stocks advancing. Momentum indicators showed 56 stocks hitting 52-week highs, compared with 48 making new lows, and 170 counters locked in upper circuits versus 33 in lower circuits.

In midcaps, Waaree Energies, Premier Energies, Godrej Properties, Tube Investments, Dixon Tech, and Bharat Forge rose 7–13%, while PB Fintech fell 5%. Smallcap gainers included PCBL, Aarti Industries, Trident, IGIL, Jyoti CNC, and Angel One, up 9–18%, while Aegis Vopak, Narayana Hrudayala, and Signature Global declined 1–4%.

Textile and leather stocks led sectoral gains, with KPR Mill, Garware Technical Fibres, and Avanti Feeds hitting upper circuits. Footwear and leather makers Bhartiya International, Mayur Uniquoters, Bata India, and Metro Brands advanced sharply. Seafood exporters Avanti Feeds and Apex Frozen Foods rose on optimism over revived U.S. shipments. Specialty chemical companies, including Aarti Industries, Atul, Neogen Chemicals, and Gujarat Fluorochemicals, also gained, with several touching 52-week highs.

The trade deal was announced on Monday following a call between U.S. President Donald Trump and Indian Prime Minister Narendra Modi. Trump said the U.S. will reduce reciprocal tariffs on Indian goods to 18%, while India agreed to lower its tariffs and non-tariff barriers on U.S. products to zero. India also agreed to stop buying Russian oil and increase purchases from the U.S., according to Trump. Modi posted on X that “made in India” products will now face reduced U.S. tariffs and expressed support for efforts toward global peace, stability, and prosperity.

Analysts said the tariff reduction exceeds expectations and provides a strong external growth stimulus for India in 2026. “This breakthrough is unequivocally positive for exports, sentiment, and financial markets,” said Radhika Rao, senior economist at DBS Bank. Trideep Bhattacharya, president of equities at Edelweiss Asset Management, called the reduction “materially better than consensus expectations.”

Indian equities underperformed other emerging markets in 2025, with the MSCI India dollar index up just 4.29% versus 33.57% for the MSCI Emerging Markets index. The rupee, Asia’s worst-performing currency last year, strengthened 1% to 90.29 per dollar after the deal.

In sectoral trading, Nifty Auto, Banking, and IT indices rose more than 2.5%, Nifty Realty gained 5%, and the Pharma index climbed 3.5%, while the FMCG index rose 0.7%.