US Trade Deal: At Rs 5,236 crore, FIIs’ purchase of Indian equities is the highest in over three months

Foreign investors returned to Indian stocks in droves on Tuesday, leaving behind a long streak of selling after the India-US trade deal removed a key overhang in markets. Foreign institutional investors (FIIs) bought shares worth Rs 5,236 crore, according to provisional data from the NSE. This marked the highest single-day FII inflow since October 28. Domestic institutional investors (DIIs) were also net buyers, picking up shares worth around Rs 1,014 crore, further supporting the rally.The sharp buying came as Indian markets reacted positively to the announcement that the US had cut tariffs on Indian goods from as much as 50% to 18%, allaying fears that had weighed heavily on stocks, the rupee and bonds for months.

The markets are emerging from the tariff crisis

Indian shares staged a strong recovery on Tuesday, with the Nifty 50 rising 2.5% for its best single-day gain since May 2025. The rally was broad-based, with heavyweight stocks leading the way.

Indian markets have been under sustained pressure since late August, when Washington imposed steep tariffs on Indian exports. The move put Indian equities and the rupee on the list of worst-performing emerging market assets in 2025, triggering record outflows of foreign investors.

Why FII buying matters now

FII returns are significant as foreign investors have been consistently selling Indian equities for months amid rate uncertainty, geopolitical risks and a strong dollar environment. The trade deal has helped address one of the biggest concerns of global investors: the risk of India being left out or disadvantaged in global trade flows.

US President Donald Trump announced the deal after a phone call with Prime Minister Narendra Modi, in which he said India had agreed to halt Russian oil purchases and lower trade barriers on US exports. While details are still emerging, Indian officials have indicated the country will increase purchases of U.S. petroleum, defense equipment and aircraft, while selectively opening up parts of its agricultural sector.

Investors see this as an important step toward restoring trade stability between the two countries. Analysts say a successful bilateral trade deal should help boost investor confidence, boost foreign investment and capital expenditure plans and strengthen the Indian rupee.

The rupee rose over 1% to around 90.26 against the US dollar, posting its strongest rally in more than seven years. Bond markets also responded positively, with the yield on the 10-year government bond falling by around 5 basis points to 6.72%, reflecting improved risk sentiment.

Geopolitical overhang is removed

The trade deal is also seen as a geopolitical reset. For months, the trade gap between the US and India had made global investors cautious about increasing their exposure to Indian assets. Analysts say the key tail risk of geopolitical isolation that investors worried about has now been addressed through successive trade deals with the European Union and the United States. This has improved India’s position at a time when global supply chains are being reworked.

The US breakthrough comes less than a week after India signed a long-awaited trade deal with the European Union that is expected to eliminate or reduce tariffs on nearly 97% of traded goods by value. Together, the two deals significantly improve India’s access to key export markets.