Sujan Hajra, chief economist and executive director of Anand Rathi Group, said that while the imposition of a 50 percent US tariff disrupted much of India’s exports, its direct impact on the profits of India’s listed companies was limited. India’s exposure to tariffs on goods to the US is mainly aimed at private SMEs and low-margin manufacturing companies, rather than large, publicly traded companies. Consequently, the subsequent rollback of tariffs in itself is unlikely to materially change the earnings trajectory of Indian equities.
Yet the macroeconomic and strategic consequences of this episode have been far more important. The tariff shock acted as a catalyst for reforms that may ultimately prove far more valuable than the tariff relief itself. It accelerated the rationalization of GST rates to protect domestic demand, pushed long-pending labor and compliance reforms to the forefront, and stimulated a deliberate diversification of India’s foreign exchange reserves away from excessive dollar concentration. Most importantly, it forced India to take deeper seek market access and geopolitical hedging through a landmark trade deal with the European Union – opening a much larger, richer and more stable export market for Indian manufacturing and services,” he added.
Meanwhile, global stock markets are also showing a strong recovery. Nikkei rose more than 3 percent, Kospi almost 5 percent.
Now that the India-US treaty is in force, that overhang has started to disappear. The most important shift is not an incremental tariff reduction, but the restoration of geopolitical and trade stability. With risk premia normalizing, India appears investable again for global capital – a fast-growing, politically aligned, strategically important economy with strong domestic demand and improving external ties with both the US and Europe, he further said.
Garima Kapoor, Deputy Head of Research and Economist at Elara Capital said: According to POTUS’s Truth Social post, the US and India have reached a trade deal, with the US reducing the reciprocal tariff for India to 18%. “Our estimates indicate that the policy implies that the effective post-deal tariff for India will be 14.1% if Russia-related tariffs are removed.” The rate of 18% brings the rate in line with Indian peers who charge rates of ~20%. The lifting of the Russian oil-related penalty is likely to generate a positive tariff differential for India.”
“Indian equities have priced in a geopolitical discount in this sense, which is now fading. The case for a catch-up rally lies less in near-term earnings improvements and more in the reversal of the capital market pessimism previously induced by the rate shock and diplomatic friction,” she said.
Analysts said after the budget that this would lead to unwinding of short positions and give a boost to Indian equities.
Ponmudi R, CEO, Enrich Money, said, “This positive external trigger is helping markets look past the recent post-Budget volatility caused by the Union Budget 2026-2027 where the unexpected rise in STT on derivatives led to a sharp sell-off, higher trading costs and pressure on heavy F&O and brokerage stocks.” As markets gradually absorb the impact of the Budget, yesterday’s recovery highlighted selective value buying in infrastructure, defense and large-cap stocks. Overall, the trade deal provides a strong boost to near-term sentiment, especially for the export-oriented and manufacturing sectors, while the government’s continued focus on capital investment provides stable underlying support for the broader market,” he said.
Published on February 3, 2026
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