A security guard walks in front of the National Stock Exchange building in Mumbai, India, on February 9, 2018.
Siddiqui in Denmark | Reuters
India’s benchmark Nifty 50 stock index rose 5% on Tuesday after New Delhi and Washington announced a long-awaited trade deal that includes a sharp cut in US tariffs on Indian exports.
US President Donald Trump announced on Monday that the US would reduce reciprocal tariffs on India from 25% to 18%. He added that India will reduce its tariff and non-tariff barriers to the US to zero.
The United States had imposed 50% tariffs on India, including a 25% tariff on purchases of Russian crude oil, but President Trump’s announcement only referred to “reciprocal” tariff reductions, causing confusion. However, Reuters reported, citing sources, that the overall tariff has been lowered to 18%.
President Trump said in a phone call with Indian Prime Minister Narendra Modi that India had agreed to stop buying Russian oil and instead “buy more” from the United States.
In his post on X, Prime Minister Modi extended his support for the US President’s efforts to usher in peace, stability and prosperity in the world, while saying that ‘Made in India’ products would receive an 18% tariff cut in the US.
Citi Research said in a report on Tuesday that India was expected to be among the first countries to sign an agreement with the US in early 2025, but the lack of an “explicit agreement” has created “a rift between India’s macro strength and the weak performance of various asset classes”.
Trideep Bhattacharya, president of equities at Edelweiss Asset Management, said the tariff cuts were “significantly higher than consensus expectations.”
“Combined with the recently concluded India-EU trade agreement, this could be one of the strongest external growth stimuli for the Indian economy in 2026,” she added.
Nifty has pared back some gains and is currently trading around 4% higher, and if it continues to rise, it is on track to reach its highest level in almost six years.
India’s stock market was the worst performer among emerging economies, with the Nifty rising more than 10% as foreign investors exited in record numbers.
In dollar terms, the market further underperformed given the depreciation of the rupee. The MSCI India Index (USD) gained 4.29% in 2025, while the MSCI Emerging Markets Index gained 33.57%.
The rupee was Asia’s worst-performing currency in 2025, hurt by the absence of a trade deal with the United States, India’s biggest export market, and sustained outflows of foreign capital.
The rupee rose 1% after the agreement was announced, and last traded at 90.29 rupees to the dollar.
“This breakthrough is clearly positive” for exports, sentiment and financial markets, said Radhika Rao, senior economist and executive director at DBS Bank, adding that “domestic markets will regain a sense of security” after high tariffs were a major drag on sentiment in the past quarter.
