Rupee, stocks get boost on truce, say investors

The US decision to sharply cut tariffs on Indian goods should strengthen the rupee and boost Indian stocks, strategists and fund managers say.US President Donald Trump announced he would cut his 25% tariff on Indian goods to 18% after Prime Minister Narendra Modi agreed to stop buying Russian oil during a phone call. Trump is also eliminating an additional 25% duty on Indian goods that he imposed in response to India’s purchases of crude oil from Russia, according to officials familiar with the matter.

The rupee hit record lows in recent days as continued outflows from local equities and the absence of a trade deal with the US weighed on sentiment. Global funds continued to pull money from Indian equities in 2026, after two previous years of outflows.

Trade developments are “hugely positive for every Indian asset class, even if full tariffs have not yet been abolished,” said Garima Kapoor, deputy head of research and economist at Elara Capital. Gemstones and jewelry, textiles, machinery and automobiles are among the stock sectors that should benefit, she said.

Here’s what strategists and fund managers had to say:

Kotak Mahindra Asset Management Co. (Deepak Agrawal, chief investment officer – debt)

• This development is likely to narrow the country’s balance of payments gap, strengthen the rupee, increase foreign exchange reserves and attract foreign institutional investors who have been waiting on the sidelines.
• This positive macroeconomic outlook is also expected to keep interest rates stable

Wright Research PMS (Sonam Srivastava, Founder)

• The deal is meaningfully positive for Indian equities, both from a sentiment and earnings visibility perspective
• Export-oriented segments such as IT services, pharmaceuticals, specialty chemicals, automotive accessories and select engineering goods benefit the most
• While the market reaction is understandably sharp in the short term, sustainability will depend on execution, sector-specific adoption and whether earnings improvements follow. Yet as a signal this is a clear risk trigger

Edelweiss Asset Management (Trideep Bhattacharya, chief investment officer – equities)

• The reduction in rates has been significantly better than consensus expectations
• Combined with the recently concluded trade deal between India and the EU, this potential represents one of the strongest external growth drivers for the Indian economy in 2026

Pepperstone (Michael Brown, senior research strategist)

• It’s pretty big news considering the trade/tariffs issue has been brewing for a while and has clearly been a significant tail risk
• The “deal” outlined by U.S. officials appears relatively favorable. Questions will arise about whether the $500 billion in purchasing commitments will ever materialize, although that is not unique to the India deal.
• Trading risks have now been significantly reduced, giving investors the confidence to not only re-enter the market via the long side, but also price a brighter economic outlook in the future