Indian Shares Set To Rally On Tariff Boost

(RTTNews) - Indian shares look set to open sharply higher on Tuesday, adding to the previous day's rebound after the U.S. decided to sharply reduce tariffs on Indian goods.

Export-oriented segments such as IT services, pharmaceuticals, specialty chemicals, auto ancillaries, and select engineering goods stand to benefit the most after U.S. President Donald Trump agreed to lower the tariff on Indian goods to 18 percent from 50 percent in exchange for India lowering trade barriers as well as stopping purchases of crude from Russia and buying oil instead from the U.S. and potentially Venezuela.

"Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25 percent to 18 percent," Trump said in a social media post following a call with Indian Prime Minister Narendra Modi.

Modi also committed to buying more than $500bn worth of U.S. energy, technology, agricultural and other products, Trump added.

Media reports suggest that the U.S. was rescinding the 25 percent punitive tariff on all imports from India over its purchases of Russian oil, but an official confirmation is awaited.

Benchmark indexes Sensex and Nifty rose over 1 percent each on Monday, after having tumbled nearly 2 percent during the special weekend trading session on Sunday amid disappointment over the government's budget proposal to increase taxes on equity derivatives trading.

The rupee gained 42 paise to settle at 91.51 against the greenback, marking its strongest single-day rise in over six weeks on the back of a structurally positive Budget and falling oil prices in international markets amid signs of easing U.S.-Iran tensions.

Foreign investors remained net sellers on Monday and offloaded shares worth Rs 1,832 crore while domestic institutional investors net bought shares to the extent of Rs 2,446 crore, according to provisional exchange data.

Global cues remain positive after overnight data showed economic activity in the U.S. manufacturing sector expanded in January for the first time in 12 months.

Benchmark 10-year yields were steady in early Asian trade after rising in the previous session.

The dollar held gains to hover near a one-week high while benchmark Brent crude contracts extended declines after settling 6 percent lower overnight on easing U.S.-Iran tensions.

Gold traded up more than 3 percent, after having hit a near one-month low in the previous session.