The stock benchmark indices Sensex and Nifty rose on Tuesday after India and the US agreed to a trade deal in which Washington will reduce reciprocal tariffs on Indian goods to 18% from the current 25%.

In early trade, the Sensex rose 4,205.27 points, or 5.14%, to an intraday high of 85,871.73, while the Nifty rocketed to 26,341.20, up 1,252.8 points or 5%.

At 10:40 am, the Sensex was trading at 84,058.19, up 2,391.73 points or 2.93%, while the Nifty was at 25,816.70, up 728.30 points or 2.9%.

The rapid rebound placed the Nifty on track for its largest single-day gain in nearly five years. The native currency also rose, with the rupee poised for its strongest session since November 2022.

Adani Enterprises, Adani Ports and Special Economic Zone, and Jio Financial Services were among the top gainers in the Nifty50, jumping up to 11% each, while Oil & Natural Gas Corporation and ITC fell up to 1%. Market breadth was favourable, with around 2911 shares advancing, 435 shares declining, and 123 shares remaining unchanged.

All 16 major sectoral indices traded in the green. The broader market also saw strong buying interest, with the Nifty small-cap100 and mid-cap100 indices surging up to 3.5% each.

Key factors behind the Sensex and Nifty rally

1) India-US trade deal: Trump said on Monday that the US has secured a trade agreement with India under which tariffs on Indian goods to the US will be reduced from 50% to 18%. He announced the decision on social media after speaking with Prime Minister Narendra Modi.

2) Advantage over regional export competitors: India presently has an 18% tariff rate, which is lower than or similar to several regional peers. Bangladesh, Sri Lanka, Taiwan, and Vietnam have 20% tariffs, whereas Pakistan, Indonesia, Malaysia, Thailand, and the Philippines face a 19% tax. Cambodia likewise has a higher tariff rate of 19%.

3) Rupee rises: The Indian rupee rose more than 1% to 90.30 to the US dollar after Prime Minister Narendra Modi and US President Donald Trump signed a trade pact, boosting investor confidence and foreign inflows. The local currency closed at 91.5363 on Monday. The rupee had gained almost 48 paisas in the previous trading session, reaching a two-week high after the Reserve Bank of India allegedly interfered in the spot market.

4) Strong global cues: In Asian markets, the South Korean Kospi rallied and increased by 5%. Japan’s Nikkei 225 index, Shanghai’s SSE Composite index, and Hong Kong’s Hang Seng index were all trading higher. The US stock market closed higher on Monday.

5) Crude declines: Brent crude, the global oil standard, fell 0.51% to USD 65.96 per barrel. Lower crude prices tend to reduce inflationary pressures and improve India’s trade balance, which boosts equity markets.

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