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Celebration street! Rupee takes biggest leap in 7 years; stock markets jump 2.5%
News of the successful US-India agreement caused both the Nifty and the Sensex to surge as much as 5% intraday. The central bank, meanwhile, reportedly bought dollars, preventing the rupee from appreciating too much, too soon. The Nifty 50 advanced 639.15 points, or 2.5%, to 25,727.5 at close of trading, while the Sensex climbed 2,072.67 points, or 2.5%, to end at 83,739.1.
“The tariff-related uncertainty was one of the many reasons for India’s rising trade gap, equity market underperformance, $19 billion of selling by foreign investors in 2025, and a weakening currency,” said Ashish Gupta, chief investment officer, Axis Mutual Fund. “The new framework removes a key source of uncertainty around the growth outlook, supporting external demand, improving business sentiment, and potentially catalysing a pickup in private capex.”
The rupee, which had the dubious distinction of being the worst performer in Asia in 2025, rallied 125 paise on Tuesday to 90.26 a dollar from 91.51. Its logical advance beyond 90, dealers said, was halted only by the central bank’s decision to buy the US currency, which it had relentlessly sold from its stockpile earlier to prevent the local unit’s rout.
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Trade Anxiety Abates
“Capital flows could see an improvement as the deal lifts overall sentiment,” said Shailendra Jhingan, head of treasury, ICICI Bank. “Foreign capital, which had stayed on the sidelines over the past few months, may begin to return, leading to inflows into both equity and debt markets.”
He expects the rupee, the value of which vis-à-vis the dollar has a disproportionate say on overseas capital flows into Mumbai-listed growth assets, to trade between 90 and 89.50 per dollar by end of March.
India’s volatility index VIX—the stock market’s fear gauge— fell 7% to 12.90, reflecting a thaw in trader anxiety. Analysts said the index could challenge its all-time high of 26,373.2 in the near term.
Altius, Fortius
“The Nifty has traded in a broad range of nearly 1,500 points for most part of May to now, and after the announcement of the trade deal, we may see this range shifting upward, with a potential for Nifty to move toward 26,650 levels on the back of improved sentiment in the coming weeks,” said Rohit Srivastava, founder, indiacharts.com.
Foreign portfolio investors were net buyers of ₹5,236 crore on Tuesday, while domestic institutions bought shares worth ₹1,014 crore. So far this year, overseas investors have net sold to the tune of nearly ₹28,180 crore.
BNP Paribas Securities said the trade deal supports its positive outlook on Indian equities this year. It expects a return of foreign fund flows to benefit IT and financial stocks.
Across Asia, markets surged Tuesday, reversing some of the recent losses. Japan gained 3.9%, China 1.3%, Hong Kong 0.2%, South Korea 6.8% and Taiwan 1.8%. In Europe, the Stoxx 600 was up 0.1% at the time of going to press.
At home, the broader market too ended strong, with the Nifty Mid-cap 150 and Nifty Smallcap 250 surging more than 2.9% each. Of the total 4,422 stocks traded on the BSE, 3,279 advanced and 1,015 declined.
Harendra Kumar, managing director of Elara Securities, said the deal strengthens India’s long-term macro setup. “With the tariff overhang now behind us, India’s longterm growth outlook has strengthened, with the GDP potentially expanding at 8-8.5% from FY28-FY29 onwards,” Kumar said. “This should support higher valuation multiples for Indian markets and, alongside a weaker rupee, improve India’s appeal to FIIs.”
Kumar expects the Nifty to hit 30,000 by March 2027.
Gupta said the tone for equities has turned more favourable after a weak start to 2026. The backdrop, he said, is improving thanks to better valuations, stronger earnings expectations, firmer economic momentum following the budget and steady domestic flows. “With tariff uncertainties now resolved, the near-term risk-reward has shifted in favour of equities, and these factors together are expected to meaningfully strengthen India’s FY27 growth outlook,” he said.