For markets, the announcement removes a major overhang that had kept foreign investors cautious and pushed Indian equities into prolonged underperformance. Indian markets had struggled through January, with the Nifty losing over 1,000 points at its worst and foreign portfolio investors selling billions of dollars worth of stocks.
Trade uncertainty, a falling rupee and persistent global risk-off sentiment had made Indian equities one of the weaker performers among major markets. Analysts had repeatedly said that any breakthrough on the India-US trade front could act as a trigger for a turnaround.
How markets may react after India, US trade deal
Sonam Srivastava, founder and fund manager at Wright Research PMS, said the reduction in tariffs from 25% to 18% is a meaningful positive for Indian equities from both a sentiment and earnings perspective. “The sharp jump in GIFT Nifty reflects an immediate repricing of risk, driven by expectations of better trade competitiveness, lower costs for exporters and stronger alignment between the two economies,” Srivastava said.
She added that export-oriented sectors are likely to see better order inflows and margin stability over time, though the sustainability of the rally will depend on how earnings upgrades play out.
Garima Kapoor, deputy head of research and economist at Elara Capital, said the 18% tariff brings India closer to peer economies that face similar rates. She pointed out that if penalties linked to Russian oil are also removed, India could gain a favourable tariff differential. In her view, the direction of the deal is clearly positive and supportive for Indian assets, even if all tariffs are not yet fully eliminated.
Trideep Bhattacharya, president and CIO for equities at Edelweiss Mutual Fund, said the reduction in tariffs has come in much better than consensus expectations. When combined with the recently concluded India–EU trade agreement, he believes this could be one of the strongest external growth drivers for the Indian economy in 2026.For the broader market, the immediate reaction is expected to be a gap-up opening, with exporters and globally linked stocks likely to lead the gains. Analysts say the deal removes a key uncertainty that had hurt sentiment, especially among foreign investors. While near-term volatility cannot be ruled out after a sharp move, the trade agreement strengthens the medium-term outlook by improving earnings visibility and reducing pressure on the rupee.
Export-oriented sectors that were hit hard when tariff fears escalated are now back in focus. Textile and apparel stocks are expected to see renewed interest after suffering sharp corrections earlier. Companies such as Kitex Garments, Pearl Global, KPR Mill, Bombay Dyeing and Indo Count had come under pressure as higher tariffs threatened their competitiveness. Firms with large US exposure, including Welspun Living, Gokaldas Exports and Trident, are also likely to benefit from improved access to the American market.
Gems and jewellery exporters are another key beneficiary. Goldiam International, which derives a large part of its revenue from the US, had been particularly vulnerable to tariff risks. Colin Shah, managing director of Kama Jewelry, said the easing of reciprocal tariffs comes as a relief for the sector, helping restore confidence among exporters as well as buyers in the US market.
Seafood exporters are also in focus after being under strain in recent months. Stocks such as Avanti Feeds, Apex Frozen Foods and Coastal Corporation had faced pressure due to concerns over demand and pricing. Lower tariffs could help stabilise volumes and margins for these companies.
Auto ancillaries and engineering exporters are expected to see renewed interest as well. Bharat Forge, which has significant exposure to the US market, Ramkrishna Forgings with its North American order book, and Balkrishna Industries, which draws a meaningful share of tyre volumes from the US, are all stocks to watch. JK Tyre is also in focus, given concerns around potential spillover effects on its Mexican operations exporting to the US.
Information technology stocks are likely to react positively too, as the US remains their largest market. TCS, Infosys, HCL Technologies and Wipro are among the stocks that could benefit from improved macro confidence and reduced trade friction, even though IT services are not directly subject to goods tariffs.
Market experts caution that while the initial reaction is likely to be strong, follow-through will depend on technical levels and global cues. Analysts note that the Nifty faces resistance near key moving averages, and a decisive move above these levels would confirm a short-term trend reversal. Cooling volatility and stabilising foreign flows would add further support to the rally.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
