Indian stock markets have seen some rise after the conclusion of the much-awaited India-US trade deal earlier this month. However, it is not the breakaway rally that traders had expected last year. Experts have highlighted reasons for markets failing to meet expectations even a week after the landmark deal was announced.
Indian stock markets recorded a sharp rally on February 3 after India and US concluded their much-awaited trade deal, but failed to hold on to the positive sentiment. The bilateral trade deal effectively reduces US tariffs on Indian exports to 18 percent from 50 percent.
"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 percent to 18 percent," Trump wrote last week in a post on Truth Social after a telephonic conversation with Prime Minister Narendra Modi.
Trump described Modi as “one of my greatest friends” and a “powerful and respected leader of his country,” adding that the two leaders discussed trade, global security and efforts to end the Russia Ukraine war.
After the announcement of the trade deal, Nifty 50 gained 1,252.80 points (5 percent) to hit an intraday high of 26,341.20 on February 3. Sensex meanwhile rallied 4,205 points (5 percent) to its day’s high of 85,871.73.
The benchmark indices then corrected. At around 2.25 pm on February 11, Sensex was down nearly 63 points (0.07 percent) at 84,211 while Nifty 50 was up 11 points (0.04 percent) at 25,945.70.
Despite the much-anticipated India-US trade deal announced on February 2, Indian equity markets remain significantly below their lifetime peaks (Nifty 50 hit 26,373.20 on January 5, and Sensex hit 86,159.02 on December 1), raising questions about the deal's immediate market impact.
While the India-US trade deal is undoubtedly a positive factor, effectively reducing reciprocal tariffs from 50 percent to 18 percent and opening pathways for broader market access, markets have been trading cautiously below their all-time highs.
According to Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, the muted response reflects three key concerns:
The positivity around the trade deal between India and US has certainly helped sentiment and improved geopolitical risks, but the reason why the market is not scaling past previous highs is that the earnings momentum is yet to pick up, said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.
"Also, the flows have been selective as far as FIIs are concerned. There has been some positivity due to the trade deal between the two nations, but the fact of the matter is that the market moves on the basis of liquidity and quarterly numbers. Until then, the markets would continue to trade in the same fashion," he said.
Pranav Koomar, Founder and CEO of PlusCash, said that the agreement on the trade deal reduced an overhang, and that did play a part. However, markets have already priced a significant part of the optimism.
“We have to remember that valuations remain relatively high, and there is not much room on the upside for markets to move substantially. Markets have been looking at domestic indicators, the rate situation, and global liquidity levels,” said Koomar.
Tanvi Kanchan, Head - Strategy, Anand Rathi Share and Stock Brokers, said that while the 18 percent tariff rate improves India's competitive position against Vietnam and Bangladesh, many competitors still enjoy the US's Generalized System of Preferences (GSP) concession offering duty-free access, limiting India's unique advantage.
"With crucial deal implementation details remaining unclear and global uncertainties—including weak US retail data and volatile IT stock performance—continuing to weigh on sentiment," she added.
"The India-US trade deal is unquestionably positive for long-term growth, but it has not solved the immediate problem: corporate earnings are weak and showing no clear recovery signal. Foreign investors, who represent critical liquidity and price discovery mechanisms, are staying on the sidelines waiting for tangible earnings growth, rupee stabilization, Implementation clarity, global tech stabilization, domestic growth acceleration," the analyst added.
Balaji Rao Mudili, Research Analyst at Bonanza, said that factors like Anthropic’s 'Claude Cowork' platform's impact on IT sector, fragility of the US-India trade deal due to Russian oil and potential US-Iran tussle's impact on oil prices are acting as headwinds.
Vaqarjaved Khan added that the markets are waiting for concrete implementation milestones before pricing in the full upside. That said, the return of FII flows and improving corporate earnings suggest the foundation for a breakout is being built, he added. “The next leg up will require demonstration of actual trade flow improvements, not just headline announcements,” he explained.
Koomar, meanwhile, said that markets will have to see earnings visibility improve, FII flows continue, and global risk markets sentiment improve in order to see the next leg of rally.
Tanvi Kanchan meanwhile explained that the trade deal remains a positive story for the second half of 2026 and FY27, but is insufficient to to reignite a sustained rally in the near term. "The markets will believe it when it actually see’s the earnings numbers, not when it see the headline announcements," she concluded.
Follow all LIVE updates from the stock markets here.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
