Why Sensex surged 1,397 pts today despite a trade war brewing in the US?

Markets in India climbed after tariffs imposed on Mexico and Canada were postponed for now, and investors assessed budget announcements fully, according to market experts

Stock Market Rally: Benchmark indices in India climbed on Tuesday, February 4, a couple of days after the presentation of Budget 2025-26, and amid a brewing trade war in North America as President Donald Trump sets the ground for negotitations with major US trading partners. 

  In the domestic market, the 30-stock BSE Sensex had climbed around 1,472 points, or 1.9 per cent, to hit an intra-day high of 78,658.6. Similarly, the NSE Nifty50 climbed 402 points, or 1.7 per cent, to an intra-day high of 23,762.7 from the previous close.  At close, the Sensex settled at 78,583.81, up 1,397.07 points or 1.81 per cent from its previous close. Similarly, the NSE Nifty50 ended at 23,739.25, up 387.20 points or 1.62 per cent.  The gains in the benchmarks were led by L&T share price (up 4.3 per cent), IndusInd Bank share price, Adani Ports share price, Tata Motors share price, Reliance Industries (RIL share price), Ultratech Cement share price, NTPC share price, and HDFC Bank share price up 2.5 per cent). 

 

  Other notable indices, including the Nifty Bank, Financial Services, Metal, Pharma, and Healthcare were settled with gains of up to 2 per cent. The Nifty FMCG index was the only index in the red, down 0.25 per cent. 

  In the broader markets, the BSE MidCap index gained 1.35 per cent, and the BSE SmallCap was higher by 1.2 per cent.

  According to market experts, the markets climbed on Tuesday on the back of a number of factors, primary among them were the announcements made in the budget and the postponement of the tariffs announced by President Donald Trump on Canada, and Mexico, even as China retaliated with its own tariffs on US goods imports.

  Budget Boost

  Independent market analyst, Ambareesh Baliga said the overall budget is not bad, but people are disappointed with no growth in infra spends. "You look at the absolute figure, that figure itself is decently large, and last  year, we could not even execute it in the infra side of things," he said.

  Along similar lines, Gaurang Shah, head investment strategist of Geojit Financial Services, said it takes a few days to understand the budget. 

  "It takes the two days to understand the budget, so there is nothing new. It was a knee-jerk reaction on Saturday; it was a knee-jerk reaction yesterday," he said.

  Shah added that the capex allocation is better than what it was last time. "You should see improvements coming in the markets," Shah added.

  That apart, Baliga highlighted that the changes in income tax regime announced in the budget were sentimentally positive.  "Sentimentally that's an upside, no doubt. At least some part of that will come into consumption. You can't say 100 per cent will come into consumption, because there are other things. People may utilise that money to invest, they may even put that money in the FDs, or they may use that to pay off the EMIs," Baliga said.

  Trump's Tariff Tantrums

  About the risk emanating from Trump's tariff regime, Baliga said, "When Trump announced the tariffs, it had an effect. But now what we are seeing is that it is more of a negotiation trick. The whole thing has been postponed to some extent because of the negotitations which will happen now; whether it is Mexico, Canada or even China. Because of which, we are seeing this bounce back".

  Meanwhile, Shah also credited the upside in the markets today to the tariffs imposed by the US on Mexico and Canada being postponed by a month.

  "Today we have an added advantage: understanding the budget more clearly, and tariffs on Mexico and Canada have been pushed back by one month. Hence the market (climbed)," he said.