By Kimberley Kao

Indian stocks rallied after President Trump said the U.S. has agreed to slash tariffs on India, soothing investor concerns after months of uncertainty about progress in negotiations.

Shares of major Indian companies rallied Tuesday, reflecting relief that a key overhang has been removed. Late last year, most Asian economies negotiated for lower tariffs on their U.S.-bound goods, but India got hit with an additional levy over its purchases of Russian oil.

In a post on Truth Social on Monday, Trump said he and Indian Prime Minister Narendra Modi agreed to a trade deal under which the U.S. would cut the so-called reciprocal tariff on India to 18% from 25%.

Trump also said Modi "agreed to stop buying Russian Oil, and to buy much more from the United States," a commitment a White House official said means the 25% penalty levied on India over Russian oil will be dropped.

Analysts say the move will remove a key overhang for markets and is likely to benefit textiles, gems & jewellery, manufacturing, auto, leather and chemicals sectors.

On Tuesday, India's benchmark Sensex index opened 4.5% higher before paring gains.

Adani Ports & Special Economic Zone jumped 7.0%, Bajaj Finance added over 6% and Reliance Industries rose more than 4%.

Shares of textile and apparel manufacturers surged, with KPR Mill and Gokaldas Exports up 20% each, while Welspun Living was 18% higher and Arvind Ltd. added 12%.

IT firms Infosys and Wipro were up about 2% each, tracking gains in U.S.-listed shares on Monday.

Citi Research analysts say Indian banks should benefit from relief over the deal too, as they have exposure to export-oriented sectors.

Financial firms were trading broadly higher in India on Tuesday.

For Radhika Rao, senior economist at DBS Group Research, the deal is "unmistakably positive" for India's economy and financial markets, as high tariffs had been a key drag on sentiment over the past quarter.

The announced reduction effectively takes India's tariff rate close to that of most Southeast Asian countries and puts it at an advantageous position versus China, Rao said.

U.S. trade policy had been weighing on the rupee too, helping drive it to record lows versus the dollar, and the Indian currency strengthened following news of the deal.

However, initial relief could give way to some misgivings, as details of the pact remain unclear. The impact of India's pivot away from Russian crude is also uncertain, analysts say.

Focus will be on how the agreement is executed: what products are covered, timelines and enforcement, said Charu Chanana, chief investment strategist at Saxo Singapore.

Particular attention will be on whether the oil pledge will raised India's import bill, feeding through into inflation and the rupee's performance, she said.

"We also need to see the details & implications of India bringing down its tariffs [which] could have negative implications for some sectors," Citi Research analysts said in a note.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

February 03, 2026 00:34 ET (05:34 GMT)

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