(Feb 3): The rupee posted its biggest gain in more than three years while stocks jumped the most since 2021 after the US sharply cut tariffs on Indian goods, bolstering investor sentiment for assets in the nation.
The NSE Nifty 50 Index soared as much as 5% and the local currency rose 1.2% to 90.4600 per dollar on Tuesday (Feb 3), after US President Donald Trump announced that he would lower his 25% tariff on Indian goods to 18%. Trump is also removing the extra 25% duty on Indian goods he applied in response to India’s purchases of crude from Russia, according to officials familiar with the matter.
The deal provides much-needed support for the struggling currency, which was Asia’s worst performer in January, with global funds extending heavy sales of Indian stocks into the new year. Equities are now primed to ease their run of underperformance to regional peers, as the deal removes a key overhang on financial assets.
“The deal finally provides some relief to the rupee and Indian markets more broadly. It will be important to see whether this contributes to any relief in terms of FPI equity flows, which clearly have been very negative over recent months,” said Mitul Kotecha, head of Asian FX and EM macro strategy at Barclays Bank plc.
The currency could reclaim the 90 per dollar level in the near term, according to HDFC Securities Ltd, although a key factor to watch out for would be the levels at which the Reserve Bank of India could buy dollars and rebuild its reserves, according to Australia and New Zealand Banking Group.
See also: Central bank governor says India not selling US Treasury holdings
Uploaded by Arion Yeow
