India’s equity market is set to open with sharp gains on Tuesday after US President Donald Trump announced a reduction in tariffs on Indian goods following Prime Minister Narendra Modi’s decision to halt purchases of Russian oil.
Trump said the United States will lower the reciprocal tariff on Indian exports to 18% from 25% as part of a trade understanding between the two countries.
“Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a trade deal between the United States and India, whereby the United States will charge a reduced reciprocal tariff, lowering it from 25% to 18%,” the US president said on social media. He also claimed that India would move to reduce “tariffs and non-tariff barriers” against the US to zero.
Prime Minister Modi welcomed the development, saying he was delighted that “Made in India” products would now face a reduced tariff of 18%.
“When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation. President Trump’s leadership is vital for global peace, stability, and prosperity. India fully supports his efforts for peace. I look forward to working closely with him to take our partnership to unprecedented heights,” Modi said on X.
The announcement sent GIFT Nifty soaring more than 800 points, or 3.2%, to touch a high of 25,962.50.
Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, said the reduction in tariffs from 25% to 18% is a meaningful positive for Indian equities from both a sentiment and earnings visibility perspective.
“The sharp surge in GIFT Nifty reflects an immediate repricing of risk, driven by expectations of improved trade competitiveness, lower input costs for exporters, and stronger bilateral economic alignment between the two countries,” she said.
“From a sectoral lens, export-oriented segments such as IT services, pharmaceuticals, speciality chemicals, auto ancillaries, and select engineering goods stand to benefit the most. Lower tariff barriers improve price competitiveness for Indian firms in the US market, which remains India’s largest export destination. Over time, this could translate into better order inflows, margin stability, and higher capacity utilisation. Domestic manufacturing themes tied to global supply chain diversification also get reinforced,” Srivastava added.
She cautioned that while the near-term market reaction is sharp, sustainability will depend on execution, sector-specific uptake, and whether earnings upgrades follow. The development comes days after India announced a major trade pact with the European Union.
Shashank Udupa, SEBI-registered investment adviser and fund manager at Smallcase, said the absence of a deal with the US had been weighing on sentiment.
“The deal is a net win-win for everyone. India has been clear that it will not expose its dairy and agriculture sectors. At the same time, we have agreed to step up energy purchases from the US, including oil, coal, and some agricultural products. Securing a deal at tariffs lower than many Asian counterparts will boost corporate profitability. We have secured two major trade deals in the span of two months — with the US and the EU,” Udupa said.
Trump had first announced reciprocal tariffs of 25% on Indian merchandise in April and, in August, imposed an additional penal tariff of 25% over continued purchases of Russian oil, taking effective duties to as high as 50% on some goods. The steep tariffs had placed Indian exporters at a disadvantage, dented investor sentiment through 2025, contributed to foreign institutional investor outflows, and put pressure on the rupee.
Indian markets had already staged a recovery on Monday after sharp selling on Budget Day. The BSE Sensex closed at 81,666.46, up 943.52 points or 1.1%, while the NSE Nifty50 rose 262.95 points or 1.06% to 25,088.40.
The rebound followed a steep fall after the government’s decision to raise the securities transaction tax (STT) on derivatives trading spooked investors. Benchmark indices had fallen nearly 3% intraday on Sunday and ended about 2% lower.