India Stock Markets Poised for Steady Open as Trade Deal Bolsters Investor Confidence

Indian equities are expected to open on a subdued note Wednesday following a robust session Tuesday, with the India-U.S. trade pact providing a crucial pillar of support for market sentiment. The breakthrough in trade negotiations has reignited investor optimism, particularly after benchmark indices Sensex and Nifty each rallied approximately 2.5 percent during the previous trading day as U.S. President Donald Trump finalized the trade agreement with India.

Union Minister of Commerce and Industry Piyush Goyal confirmed that the agreement includes protective measures for India’s agricultural sector and dairy industry, assuaging concerns about potential tariff-related vulnerabilities. This strategic negotiation has effectively defused months of anxiety surrounding trade restrictions that had previously weighed on domestic market performance.

Rupee Strengthens as Trade Barriers Ease

The Indian rupee posted a significant gain of 122 paise, closing at 90.27 per dollar, reflecting renewed market confidence in the nation’s economic prospects. Moody’s Ratings underscored that tariff reductions on most Indian goods are credit-positive for labor-intensive sectors including gems, jewelry, textiles and apparel—industries that form the backbone of India’s export-oriented economy. In rupee terms, the $1.2 trillion government budget signed by President Trump (equivalent to approximately £880bn in sterling) signals substantial fiscal commitment, which has broader implications for global economic stability and trade flows.

Rating agencies noted that while India is unlikely to immediately halt all Russian oil purchases, a gradual transition toward non-Russian energy sources could create supply pressures elsewhere, potentially lifting global crude prices and feeding through to inflationary pressures given India’s position as one of the world’s largest petroleum importers.

Foreign Capital Returns to Dalal Street in Force

Foreign institutional investors (FIIs) mounted a decisive comeback to Indian equities Tuesday, executing their largest single-day purchase since late 2025. The inflow totaled Rs. 5,426 crore in the cash market, signaling a sharp reversal of the prolonged overseas selling that had plagued markets in preceding weeks. Domestic institutional investors (DIIs) complemented this activity with purchases worth Rs. 345 crore, according to exchange data, demonstrating renewed conviction across both foreign and domestic capital bases.

Global Markets Provide Mixed Backdrop

U.S. equities retreated from near-record highs overnight as traders rotated capital out of technology shares toward economically-sensitive sectors. Advanced Micro Devices issued guidance for a slight revenue decline in first-quarter results, ahead of earnings announcements from major technology firms including Google and Amazon. European markets closed unchanged after surrendering early gains, while Asian trading opened on a mixed footing.

The dollar index climbed in Asian trade after declining overnight in New York, while Treasury yields held steady as Federal Reserve Governor Stephen Miran reiterated arguments for aggressive interest rate cuts in 2026. Richmond Federal Reserve President Tom Barkin suggested the central bank still has “considerable distance” to cover before achieving dual-mandate balance between maximum employment and stable prices.

Commodities Rally on Geopolitical Tensions

Gold surged more than 2 percent to $5,048 per ounce, building on its strongest day since 2008, as escalating U.S.-Iran tensions resurfaced as a market concern. Crude oil extended its recent gains after rising approximately 2 percent Tuesday, following the U.S. military’s interception of an Iranian drone that approached the Abraham Lincoln aircraft carrier in the Arabian Sea, underscoring persistent geopolitical risks in energy markets.

The combination of supportive trade developments, returning foreign capital, and renewed commodity strength has created a complex backdrop for Indian markets, where structural improvement from the trade agreement may compete with headwinds from global rate expectations and energy price volatility.