Indian rupee, stocks soar in relief rally after trade deal with the US

India’s financial markets rallied sharply on Tuesday after a trade deal that slashed US tariffs on Indian goods to 18% from 50%, a development that investors said lifts a key overhang over the country’s stocks, bonds and currency.

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India’s benchmark stock index, the Nifty 50, was up nearly 3 per cent and the rupee climbed over 1 per cent to 90.40 per dollar in early trading. The yield on the country’s 10-year benchmark bond declined 5 bps to 6.72%

The Nifty rose as much as 5% in early trading with the rise putting it on course for the best one-day gain in five years, while the rupee was on track for its best day since November 2022.

US President Donald Trump announced the deal on social media following a call with Indian Prime Minister Narendra Modi, noting that India had agreed to halt Russian oil purchases and lower trade barriers on US exports.

Indian stock markets and the rupee have been battered since the tariffs were levied by Washington in late August, placing them among the worst-performing emerging market assets in 2025, with record foreign investor outflows.

The trade breakthrough is expected to alleviate the persistent drag, with investors expecting a bounce-back in foreign sentiment and flows into Indian assets.

“A successful bilateral trade agreement should help enhance investor confidence, boost foreign investment and capital expenditure plans while strengthening the Indian rupee,” said Marcella Chow, global market strategist at J.P. Morgan Asset Management.