Sensex surges 4,200 points as India-US trade deal boosts markets
What's the story
India's equity benchmark indices, Sensex and Nifty, witnessed a massive surge on Tuesday morning. The rally was triggered by the announcement of a historic trade deal between the US and India. The agreement is expected to boost business between the two nations and has already sent markets into a frenzy. Sensex opened about 4,200 points higher, while the Nifty surged nearly 1,250 points. Both indices jumped over 5%, logging their sharpest single-day gains since April 7, 2020.
Market reaction
All major sectoral indices open in green
The market responded positively to the trade deal, with all 16 major sectoral indices opening in the green. The broader market also witnessed strong buying interest, with small-cap and mid-cap indices rising by 3.5% each. Adani Enterprises, Adani Ports and Special Economic Zone (APSEZ), and Jio Financial Services were among the top gainers in the Nifty50 pack, rising up to 11%. However, Oil & Natural Gas Corporation (ONGC) and ITC declined up to 1%.
Competitive advantage
India's competitive edge over regional export competitors
The trade deal with the US gives India a competitive edge over its regional export competitors. The new tariff rate of 18% is lower than or comparable to those of several regional peers. Bangladesh, Sri Lanka, Taiwan, and Vietnam are all subject to tariffs of 20%, while Pakistan, Indonesia, Malaysia, Thailand, and the Philippines face tariffs at 19%. Cambodia too has a higher tariff rate at 19%.
Currency impact
Rupee strengthens against US dollar
The rupee also strengthened against the US dollar, rising over 1% to 90.40 in early trade. The yield on the 10-year benchmark government bond eased by five basis points to 6.72%. This further indicates a positive market sentiment following the announcement of the India-US trade deal and its potential economic implications for India.