Trump Cuts Tariffs to 18%: Sensex Surges 2500 Points, Nifty Hits 25,800

The Indian equity markets witnessed a historic rally during the early trading session on February 3, driven by a landmark trade announcement from the United States. US President Donald Trump confirmed a significant reduction in import tariffs on Indian products, lowering them from 50% to 18%. 9%, reaching the 84,000 mark. 9%, trading at the 25,800 level. This massive upswing reflects the market's optimism regarding enhanced bilateral trade and improved export prospects for Indian industries.

Sectoral Performance and Major Gainers

The rally was broad-based, with the Realty, IT, and Auto sectors leading the gains, while the Nifty Realty index emerged as the top performer, surging nearly 5%. The IT and Auto indices followed closely, each gaining approximately 4%. Other key sectors, including Nifty Metal, Pharma, Healthcare, and Banking, also recorded gains of around 3%. Within the Nifty 50 pack, 46 stocks were trading in the green, while only 4 stocks faced minor selling pressure. Analysts attribute this widespread buying to the removal of trade barriers, which is expected to boost the bottom lines of export-oriented companies.

Details of the India-US Trade Agreement

President Donald Trump stated on February 2nd that he has reached a consensus on a trade deal with India. Under this agreement, the US will reduce tariffs to 18%, while India has agreed to pivot its energy procurement strategy. India is expected to halt oil purchases from Russia and Notably increase its imports of energy, technology, and agricultural products from the United States. This strategic realignment is viewed by market experts as a move to strengthen diplomatic ties while securing a more favorable trade environment for Indian manufacturers in the American market.

Economic Implications for Key Export Sectors

The tariff reduction is expected to provide five major advantages to the Indian economy. Firstly, 'Made in India' products will become more price-competitive in the US, likely driving higher demand. The textile and garment sector is poised for significant growth, as the US accounts for 28% of India's total textile exports. Secondly, the engineering and auto parts segments are expected to secure larger orders due to lower landed costs. Also, the seafood and jewelry industries will benefit from reduced export expenses. Finally, the deal is anticipated to strengthen the Indian Rupee against the US Dollar and bolster overall market sentiment.

Global Market Context and Institutional Activity

The positive sentiment in India mirrored a broader rally in global markets. 02%. Hong Kong's Hang Seng and China's Shanghai Composite also traded in positive territory. In the US, the Dow Jones and Nasdaq had closed higher on February 2nd. Regarding institutional flows, Foreign Institutional Investors (FIIs) sold shares worth ₹1,859 crore on February 2nd, while Domestic Institutional Investors (DIIs) supported the market with purchases worth ₹2,411 crore. In December 2025, DIIs had invested a substantial ₹79,620 crore, offsetting FII outflows of ₹34,350 crore.

Market Outlook and Conclusion

The current rally provides a significant recovery after the volatility observed following the February 1st Budget announcement, where the Sensex had dropped 1,546 points due to the hike in Securities Transaction Tax (STT). The India-US trade deal has effectively shifted the narrative from domestic tax concerns to global growth opportunities. According to market analysts, the successful implementation of this deal could lead to a long-term structural shift in India's export dynamics. Investors are now closely monitoring the formal documentation of the trade agreement and its subsequent impact on corporate earnings in the upcoming quarters.