India-US Trade Deal Sparks ₹5,426 Crore FII Buying, Driving Market Rally

Foreign institutional investors (FIIs) made a notable comeback to Dalal Street on Tuesday, logging their biggest single-day purchases since October 28, 2025. The driving factor behind this surge was the finalisation of the much-awaited India–US trade deal, which has reignited investor confidence and lifted market sentiment.

According to data from NSDL, FIIs bought shares worth ₹5,426 crore on February 3. Domestic institutional investors (DIIs) also added ₹345 crore in equities, fueling one of the strongest single-day gains in recent months. As a result, benchmark indices surged over 2%, marking a high point in February trading.

Early February FII Trend

• In the first three trading sessions of February, FIIs have net purchased stocks worth ₹788 crore.
• If this trend continues through the month, February could be the first month since October to record net foreign inflows into Indian equities.

This uptick comes after a prolonged period of heavy FII outflows in 2025. Since early August last year, FIIs withdrew a net ₹1,06,606 crore from Indian markets, including ₹35,962 crore in January alone. The surge in outflows coincided with the imposition of a 25% additional tariff by the US on India, which took the effective rate to 50%. For the full year 2025, net FII outflows touched a record ₹1,66,286 crore.

Despite the strong foreign selling, domestic investors provided a crucial buffer. DIIs continued to pump liquidity into equities, reaching record inflows of $90 billion in 2025. This support helped the market remain stable even amid global uncertainties and trade tensions.

Key Highlights of the India–US Trade Deal

• Tariffs on Indian exports reduced from 50% to 18%, removing a major market overhang.
• Eases concerns on trade barriers for sectors like IT services, pharma, auto ancillaries, and specialty manufacturing.
• Provides renewed clarity on medium-term earnings and growth prospects for Indian businesses.

Market Sentiment and Outlook

The trade deal has clearly shifted market sentiment from caution to optimism. Early FII purchases indicate renewed confidence in Indian equities, while domestic investors continue to sustain market momentum. The combination of trade clarity, stable macroeconomic conditions, and supportive domestic flows has contributed to a sharper market rally.

While the momentum is encouraging, past experience shows that FII flows can be volatile. Nevertheless, the start of February suggests that net foreign inflows are back in play, creating a more positive backdrop for equity markets.

Summary

The India–US trade agreement has not only removed a key tariff-related overhang but also sparked substantial FII buying of ₹5,426 crore on February 3. Coupled with domestic support, this has propelled indices more than 2% higher, marking one of the strongest single-day gains in recent times. Early February data hints at the possibility of sustained foreign inflows, marking a notable shift in investor sentiment after a year of record outflows.

Source: Livemint