Indian equity markets saw a powerful rally on Tuesday, February 3, 2026, with benchmark indices surging sharply after news broke of a trade agreement between India and the United States.

What triggered the rally?
The upturn was driven by the announcement that the U.S. would cut reciprocal tariffs on Indian goods to 18 percent — a significant reduction from the earlier 50 percent level and a reversal of punitive duties that had previously reached as high as 50 percent under tariffs linked to geopolitical tensions.

This trade deal eased a major overhang on the markets, improving earnings visibility for exporters, reducing trade uncertainty and strengthening investor confidence. Analysts at major brokerages highlighted that the removal of tariff obstacles and clearer trade relations are likely to attract renewed foreign investment flows into Indian assets.

Market reaction was broad-based:

The BSE Sensex rose as much as 2,288.84 points, approaching 83,948 in midday trade.

The Nifty 50 gained nearly 2.8 percent, putting it just short of all-time highs.

The Indian rupee strengthened over 1 percent to around Rs 90.4 per dollar.

The 10-year government bond yield fell, signaling easing risk perceptions.

Export-oriented sectors such as textiles, gems and jewellery, auto ancillaries and engineering goods saw notable buying interest, as tariff cuts directly benefit their competitiveness in the U.S. market.

Experts described the deal as a key catalyst that removed a long-standing policy overhang. By reducing trade barriers, the agreement not only boosts export potential but also improves market sentiment, encouraging both domestic and foreign investors to re-enter Indian equities.