Indian Markets Rebound as US Announces Trade Deal with India

The markets hit a four-month low on Budget day. But subsequent developments suggest that the stars are finally aligning for India. The US, which had been in a threatening and punitive mode on trade tariffs since April 2025, finally relented on February 2 and announced a trade deal, the contours of which will be chiselled later. A combination of restraint, studied silence, and some plain speaking backed by facts and figures by the government drove home the point that India was not anti-US but was merely ensuring fair play for its people. The US buckled under pressure when it saw that the India-EU deal was imminent. Its representatives were in South Block even while the EU team was in India during the January 25–27 period. Not wanting to lose India, the US even released a map showing PoJK and Aksai Chin as part of India. Technically speaking, it was a highly volatile week, not seen in months. The Nifty made a low of 24,571 on Sunday, February 1, after the presentation of the Union Budget, and closed at 24,825. The apprehension was that when FIIs returned in full force on Monday, markets could tumble further. But that didn’t happen. The Nifty made a higher low of 24,679 — 108 points higher than Sunday—and closed still higher at 25,088. On Tuesday, the Nifty opened sharply higher with a gap of 1,200 points—the largest rise ever in point terms in the index’s history—as the US announced its intention to strike a trade deal with India. The markets have largely lingered lower since that Tuesday gap-up but still managed to close the week with a gain of 373 points, or 1.47%. The Nifty is now above its 50-, 100-, and 200-day exponential moving averages. A positive divergence is also visible in the Relative Strength Index, which augurs well. However, continued weakness persists in the mid- and small-cap indices. Both have recovered some lost ground intraday, indicating a possible trend reversal—something that will require positive follow-up this week. A gap of 51 points exists between the high of 25,400 seen on Budget day and the low of 25,491 on Friday. This zone will act as a strong support. In terms of resistance, 25,818—the high seen on Wednesday—is the first major hurdle. Above this, strong resistance comes from trendline number 85 and the highs of 26,341 seen on February 3 and 26,373 registered on January 5. It must be remembered that the trade deals are still a work in progress and will take time to be implemented. They will first need to be agreed upon, signed, and passed by the respective parliaments before coming into effect. Investors will have to be patient.