India’s Nifty 50 skyrockets 5% as U.S.-India trade deal boosts investor

India’s benchmark Nifty 50 stock index rose 5% on open Tuesday, after New Delhi and Washington announced a long-awaited trade deal that saw a sharp cut in U.S. tariffs on Indian exports.

U.S. President Donald Trump on Monday stateside said that U.S. will cut reciprocal tariff on India to 18% from 25%. He added that India will reduce its tariff and non-tariff barriers against the U.S. to zero.

The U.S. had levied 50% tariffs on India, including a 25% duty for purchasing Russian oil, but Trump’s announcement only mentioned cutting “reciprocal” tariffs causing some confusion. Reuters, however, reported citing sources that the overall tariff had been reduced to 18%.

Trump said that during his call with Indian Prime Minister Narendra Modi, India agreed to stop buying Russian oil and instead “buy much more” from U.S.

Modi, in his post on X, said that “made in India” products will now face reduced tariffs of 18% in the U.S. while extending support for U.S. president’s efforts to usher global peace, stability and prosperity.

At the beginning of 2025, India was expected to be among the first countries to sign an agreement with the U.S. and the lack of an “explicit deal” created a “rift between India’s robust macros and the weak performance of different asset classes,” Citi Research said in its report on Tuesday.

The reduction in tariffs has come in “materially better than consensus expectations,” said Trideep Bhattacharya, president, equities, at Edelweiss Asset Management.

“When combined with the recently concluded India–EU trade agreement, this potentially represents one of the strongest external growth stimuli for the Indian economy in 2026,” she added.

The Nifty pared some gains and was last trading about 4% higher, putting it on course for its best day in nearly six years, if gains hold.

Indian equity market was among the weakest performers in emerging countries as foreign investors exited in record numbers, with the Nifty gaining a little over 10%.

In dollar terms, given the decline in the rupee, markets underperformed even more. The MSCI India index [dollar] gained just 4.29% in 2025 as compared to MSCI Emerging Markets index that rose 33.57%.

The rupee was Asia’s worst performing currency in 2025, hurt by the absence of a trade deal with the U.S., India’s largest export market and persistent outflows in foreign funds.

Following the announcement of the deal, the Rupee strengthened 1% and was last trading at 90.29 per dollar.

“This breakthrough is unequivocally positive” for exports, sentiments and financial markets, Radhika Rao, senior economist and executive director at DBS Banks said, adding that “domestic markets are expected to witness a relief rally,” as high tariffs were a key drag on sentiment in the past quarter.