Nifty 50 Eyes 26,000 as Historic India-US Trade Deal Slashes Tariffs to 18%: February 4 Market Preview

Introduction

Indian equity markets are poised for a robust gap-up opening on Wednesday, February 4, 2026, as the 'Trump-Modi' rally gains structural support from a landmark bilateral trade agreement. The breakthrough deal, which sees US tariffs on Indian goods slashed from a threatened 50% to a settled 18%, has ignited a powerful relief rally across Dalal Street. This agreement serves as a major de-risking event for Indian exporters who had been grappling with the uncertainty of protectionist trade policies.

For retail investors, the current environment represents a decisive shift in sentiment. While the broader market sentiment has turned bullish following Monday’s spectacular 2.6% surge—the strongest single-day gain in recent months—technical nuances suggest a battle between momentum and profit-taking at higher levels. With GIFT Nifty futures trading around the 25,761-25,879 range, indicating a positive start of 100-150 points, the Nifty 50 is set to challenge the psychological and technical barrier of 26,000.

In this comprehensive preview, we analyze the global backdrop, the intricate details of the trade deal, technical levels for major indices, and the heavy corporate earnings calendar that will dictate stock-specific volatility throughout the session.

Global Market Overview: Navigating Tariff Tensions

While India celebrates its trade breakthrough, the global landscape remains complex due to shifting tariff dynamics and technology sector volatility.

US Markets: Technology Sector Weakness

US equity markets closed with modest losses on Tuesday, February 3, 2026, though indices recovered significantly from their session lows. The sell-off was primarily concentrated in the technology space as investors booked profits in AI leaders like Nvidia and Microsoft.

• S&P 500: Declined 0.8% to close at 6,976.44.
• Dow Jones Industrial Average: Showed relative resilience, dipping only 0.3% to 49,407.66.
• Nasdaq Composite: Led the declines with a 1.4% drop to 23,592.11.

Key Development: A critical relief factor for global markets was President Trump’s decision to delay the proposed 25% tariffs on Mexico and Canada by 30 days. However, investors remain wary as the 10% tariff on Chinese goods officially takes effect today, February 4. This creates a "divergent trade" scenario where India may emerge as a preferred alternative supplier in the global supply chain.

Asian Markets: Divergent Regional Trends

Asian markets have displayed mixed performance as of early February 2026:

• Nikkei 225 (Japan): Leading the pack with +4.6% YTD gains, buoyed by a weak yen.
• Hang Seng (Hong Kong): Up +4.5% YTD on hopes of Chinese stimulus.
• BSE Sensex (India): Recovered sharply from a -4.2% YTD deficit following the trade deal announcement.

India-US Trade Deal: A Game-Changing Breakthrough

The trade agreement announced by the US administration represents a watershed moment for the Indian economy. By reducing the effective tariff rate to 18%, the deal provides immediate competitive advantages to Indian manufacturers.

Deal Highlights and Strategic Commitments

• Tariff Relief: Reduction from an initially threatened 50% (and a previously announced 25% reciprocal rate) down to 18%.
• Margin Impact: Analysts estimate an immediate margin improvement of 300-400 basis points (bps) for affected export companies.
• Energy Shift: India has committed to a complete cessation of Russian oil purchases, instead pivoting to increased imports from the United States and Venezuela.
• "Buy American": India will implement initiatives to address bilateral trade imbalances through increased procurement of US goods and services.

Sectoral Winners from Tariff Reduction

1. Textiles & Apparel (High Impact): A 32-percentage point reduction in potential tariffs makes companies like Welspun India, Trident, and Vardhman Textiles highly competitive against peers in Vietnam and Bangladesh.
2. Gems & Jewellery (High Impact): As a major export to the US, the relief will boost bottom lines for Titan, Kalyan Jewellers, and PC Jeweller.
3. Seafood Exports (Moderate-High Impact): India is a leading shrimp exporter; lower tariffs enhance price competitiveness for Avanti Feeds and Apex Frozen Foods.
4. Specialty Chemicals & Pharma (Moderate Impact): Strengthening the "China+1" strategy, firms like SRF, Aarti Industries, and Sun Pharma stand to gain market share in the US.

Technical Analysis: Key Levels for February 4, 2026

Nifty 50 Technical Outlook

On February 3, the Nifty 50 closed at 25,727.55, up 1.06%. While the price action was positive, the formation of a long upper wick suggests that sellers are active near the 25,850 zone. The index is currently trading above its 20-day Moving Average (DMA) but is approaching the 50-day DMA resistance.

Bank Nifty Technical Setup

Bank Nifty closed at 59,495 on Tuesday. While it showed a 0.49% gain, it has faced some resistance from a falling trendline. However, the fundamental outlook remains supported by the broader economic optimism stemming from the trade deal.

Options Market Analysis: PCR and Open Interest

• Put-Call Ratio (PCR): Standing at 0.92, indicating a balanced sentiment with a slight bullish bias. It suggests the market is not yet in "overbought" or euphoric territory.
• Max Pain: Located at 25,700, aligning with the current market price and intraday pivot.
• Call Open Interest: The 26,000 strike has the highest concentration (77.93 lakh contracts), marking it as a formidable resistance.
• Put Open Interest: The 25,500 strike is the primary support base with 39.62 lakh contracts.

Institutional Flow Dynamics (FII & DII Activity)

One of the most significant catalysts for the current rally is the decisive return of Foreign Institutional Investors (FIIs) to the buy side.

Analysis: The massive ₹5,236 crore inflow from FIIs on February 3 is one of the strongest single-day figures in recent months, signaling institutional confidence in the post-trade-deal policy environment.

Commodity and Currency Markets

• Crude Oil: WTI Crude is trading at $68.15 per barrel, up 1.4%. While higher oil prices usually pressure the Indian Rupee, the strategic energy partnership with the US may mitigate supply risks. Retail investors should watch the $70 mark as a key resistance for oil.
• Currency: The USD/INR remains stable at ₹90.40. The trade deal has provided a fundamental floor for the Rupee by improving export visibility. The Dollar Index (DXY) is currently facing resistance near 98.00-98.50.

Earnings Calendar: Q3 FY26 Focus (February 4)

Corporate earnings will act as the secondary driver for today's market session. Key stocks to watch include:

1. Trent Limited: High expectations for the Zudio and Westside formats. Same-store sales growth (SSSG) is the key metric.
2. Asian Paints: Watching for volume growth and margin recovery amid rising competition in the paints sector.
3. Tata Power: Analysts will focus on renewable energy capacity additions and the performance of thermal plants (Analyst call at 6:00 PM IST).
4. Torrent Power: Focus on unit sales and the project pipeline.
5. Godrej Properties: Presales value and new launch updates will drive real estate sentiment.

Previous Reactions: Divi’s Labs surged after a 65% profit jump, while Power Grid may face pressure following a 4% decline in net profit.

Trading Strategy for February 4, 2026

General Approach: Buy on Dips with strict discipline.

Index Trading (Nifty 50)

• Entry Zone: If Nifty dips to 25,600-25,650, consider long positions.
• Stop Loss: 25,500 on a closing basis.
• Targets: 25,850 (Target 1) and 26,000 (Target 2).
• Management: Book partial profits at 25,900 and trail stop losses.

Sector Focus

• Primary: Buy quality names in Textiles (Welspun, Trident) and Gems & Jewellery (Titan).
• Secondary: Accumulate large-cap financials (HDFC Bank, ICICI Bank) on any weakness.

Options Strategy

Consider a Bull Call Spread for the weekly expiry:

• Buy 25,800 Call
• Sell 26,000 Call
• Logic: Limits risk while positioning for a move toward the 26,000 resistance zone.

Key Takeaways for Investors

• Gap-Up Signal: GIFT Nifty indicates a strong start between 25,850 and 26,000.
• Trade Deal Impact: The tariff reduction from 50% to 18% is a structural positive for exporters, potentially adding 300-400 bps to margins.
• Institutional Alignment: For the first time in several sessions, both FIIs and DIIs were net buyers on February 3 (~₹6,250 Cr combined).
• Resistance at 26,000: This remains the primary hurdle for the bulls due to high Call Open Interest.

What This Means for Investors

The India-US trade deal is not just a one-day event; it represents a fundamental shift in India's export potential and strategic energy security. Historically, such breakthroughs lead to sector rotation where traditional favorites (like IT) might underperform relative to manufacturing and export-heavy sectors (Textiles, Chemicals).

Investors should monitor the implementation of the 10% US tariff on Chinese goods starting today. This could accelerate the movement of global orders toward Indian firms. However, caution is advised at the 26,000 level. As evidenced by the long upper wicks on recent daily candles, the market remains prone to intraday profit booking. A disciplined approach—avoiding chasing the gap and focusing on high-quality technical breakouts—remains the most prudent path.