US–India Trade Deal Clears the Way for Fresh Foreign Inflows into Indian Stocks

Indian stock markets have received a major positive trigger after India and the United States finalized a long-awaited trade agreement, a move widely seen as paving the way for renewed foreign investor inflows into Indian equities. Under the agreement, Donald Trump reduced US tariffs on Indian goods to 18% from 25% and removed an additional 25% duty linked to India’s purchases of Russian crude oil. This removes a key overhang that had earlier weighed on Indian assets, triggered record foreign outflows, and pressured the rupee to record lows. Indian equities had underperformed Asian peers, recording their worst January since 2016, while India’s valuation premium over Asia dropped to a nearly five-year low amid tariff worries and earnings slowdown concerns. With the deal now finalized, fund managers believe this underperformance could reverse. Early market signals were strong. Nifty 50 futures at GIFT City surged up to 4.5%, while the NSE Nifty 50 Index gained 1.1%, its best single-day rise in over two months, even as most Asian markets ended lower. The trade deal, coming right after a pro-growth Union Budget, could revive foreign capital inflows, support the rupee, and improve overall risk sentiment. Some fund managers estimate that nearly $100 billion of global capital had been waiting for clarity on US–India trade relations. While concerns remain around mixed corporate earnings and future US purchase commitments, investors are increasingly drawing confidence from the trade agreement and India’s manufacturing- and infrastructure-focused growth strategy, turning sentiment decisively positive for Indian equities.