Indian Stock Market Surges on US-India Trade Deal Consensus

The Indian stock market got a shot in the arm on Tuesday after the surprise announcement by US President Donald Trump and Indian Prime Minister Narendra Modi on social media that the two countries have arrived at a consensus regarding the India-US trade deal. While the details of the deal are yet to come out, the enthusiasm was evident in the market with all the benchmark indices rising by over 2.5%, leading to rise in the investor wealth by 12.11 lakh crore – the fourth highest ever. The Sensex jumped 2072 points to close at 83,739 while the Nifty rose 639 points to close at 25,727 points. Intra-day, the Sensex and Nifty rose by 4,205 points and 1,252 points – the highest rise on a single day, in terms of points, ever. The broader market also did rather well, with the BSE Midcap and BSE Smallcap gaining 2.57% and 3.42% respectively – marking the best single-day rise in nine months. Nilesh Shah, MD, Kotak Mutual Fund said, “The India US FTA deal is like a Bollywood movie. With all the twists and turns, it is a happy ending.” However, he added that the real work now begins as details have to be worked out and India Inc will have to take advantage of the opportunities created. “The market reaction was more of short covering and FOMO,” he said. According to data from the NSE derivatives segment, short-sellers were indeed caught in the fix on Tuesday’s expiry session, as premiums surged sharply and delivered multi-bagger returns for call option buyers. The Nifty 25,000 strike call option price zoomed nearly 1,200% intraday—from Rs 131.90 on Monday to Rs 1,700—before closing at Rs 726.90, still up 451%. In fact, FPIs also cut their net short positions by 20% in the Nifty index futures, from 1.97 lakh contracts in open interest on Monday to 1.57 lakh contracts on Tuesday. A Balasubramanian, MD & CEO, Birla SunLife Mutual Fund believes that the India-US trade deal is a decisive win for certainty, removing a key overhang for Indian markets as it materially improves visibility on capital flows, the rupee, and manufacturing investment. He said that the 18% tariff—below Vietnam’s 20%—sharply improves India’s relative competitiveness as a China-plus-one destination. “For investors, the bigger signal is predictability: businesses can pivot from tariff risk to execution and capacity building,” he added. However, most believe that more clarity is needed on the contours of the final deal. Balasubramanian said that while the $500 billion purchase commitment still needs clarity, the settlement strengthens India’s credibility as a stable trade partner and sets the stage for a sustained mutual growth. Shankar Sharma, founder, GQuant said that there are still plenty of questions left to be answered still. Some of the key questions, according to him, is the period over which the $500 billion purchase will be made. Since India has a $45 billion surplus with the US now, how will that pan out in the light of these import requirements? He also pointed out that the important question will be whether we will have a trade surplus or deficit or neutral in the next five years. Barring two stocks from the 30-member Sensex, and all but four stocks from the Nifty 50, all index constituents ended the session higher. Heavyweights Reliance Industries, HDFC Bank, ICICI Bank, SBI and L&T together contributed nearly 50% of the Sensex’s total gains, accounting for about 1,028 points of the 2,073-point rally. Adani Ports, Bajaj Finance, InterGlobe Aviation (IndiGo), Power Grid and Sun Pharma were the top Sensex performers, gaining up to 9.12%. Adani Enterprises topped the Nifty gainers’ list, surging 10.58%. Foreign portfolio investors were strong buyers, purchasing shares worth Rs 5,236.28 crore, while domestic institutional investors bought equities worth Rs 1,014.24 crore, according to provisional BSE data.