India-US Trade Deal: Modi-Trump Bonhomie Boosts Rupee, Stock Market Amid Trade Deal Hopes

Optimism surrounding a potential trade deal between India and the United States has led to a significant strengthening of the Indian Rupee and a rally in the domestic stock markets, while following positive discussions between Prime Minister Narendra Modi and US President Donald Trump, reports suggest that the 50% tariff imposed by the US on Indian goods could be reduced to 15-16%. This development has created a stir across currency and equity markets.

Rupee on an Upward Trajectory

In early trading on Thursday, the Rupee surged by 13 paise to 87. 80 against the US dollar. Foreign exchange traders attributed this gain to solid foreign capital inflows, a positive trend in domestic equities, and improved risk-based sentiment among investors. The Rupee had closed at 87. 93 against the US dollar on Monday. Forex markets remained closed on Tuesday and Wednesday due to Diwali and Diwali Balipratipada.

Modi-Trump Friendship Paves the Way

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that the Indian Rupee opened stronger following optimism about the US-India trade agreement, while trump also claimed that India would reduce its Russian oil purchases. Both leaders discussed trade-related issues over the phone, with Trump subsequently describing India-US relations as "great" and hinting at "great deals" in the pipeline. This marks a potential easing of tensions that arose after Washington imposed a hefty 50% tariff on Indian goods.

Stock Market Witnesses 800-Point Surge

The positive market sentiment translated into a strong performance on the domestic stock exchanges. In early trade, the Sensex jumped over 800 points to cross the 85,200 mark, while the Nifty climbed 198. 3 points to 26,066. 90. Foreign institutional investors (FIIs) were net buyers, purchasing shares worth Rs 96. 72 crore on Tuesday, contributing to the market's rally. However, market sentiment is expected to remain cautious as traders monitor global cues, US economic data, and RBI's monetary signals for future direction.